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Hong Kong's commercial property market is increasingly demonstrating a location-based recovery, as indicated by the divergent performances of major landlords across different districts. Swire Properties, a leading developer, showcased this trend in its first-half results unveiled on Thursday.

Swire's office properties are strategically located in both Admiralty, located adjacent to Central's financial district, and Quarry Bay, a business hub in the eastern part of the city. The Pacific Place complex near Central exhibited a 98% occupancy rate, with selective indications of positive spot rents as financial firms renewed leases and upgraded to premium office spaces.

Conversely, at Taikoo Place, an adjacent Quarry Bay site with a burgeoning supply of new offices and heightened vacancy rates, leasing conditions remained competitive, with an occupancy rate of 91% for One Island East and One Taikoo Place, and 80% for Two Taikoo Place.

Swire's CEO, Tim Blackburn, noted a "flight-to-quality" trend, wherein occupants are gravitating towards superior, more sustainable, and amenity-rich office spaces. This shift is evident in the earnings of Swire, which saw an 11% rise in underlying profit to HK$4.9 billion (US$624.7 million) and a 36% increase in recurring underlying profit to HK$4.66 billion.

The firm's overall office portfolio occupancy was 90%, and revenue climbed by 8% to HK$9.41 billion. Swire's profit turned positive, amounting to HK$3.63 billion, after a loss of the previous year, driven by stabilizing office valuations, resilient rental income, and HK$1.21 billion in profit from the sale of two luxury houses.

Central, Swire's largest office market, led the gains, with Hongkong Land, the district's premier office landlord, reporting an 11% surge in underlying profit last week due to increased demand from financial firms pushing up average office rents. However, Wharf REIC, which owns Harbour City, a premier shopping centre in Tsim Sha Tsui, and Times Square, a major retail and office complex in Causeway Bay, faced challenges in its office portfolio, reporting a 6% rise in underlying net profit to HK$3.31 billion, but a net loss of HK$176 million due to a HK$3.55 billion property valuation shortfall.

Despite Harbour City's office occupancy improving to 93%, rents remained subdued, while Times Square, at 89% occupancy, experienced competition from abundant new supply and lower-cost alternatives.

Beyond office spaces, Swire's Hong Kong shopping malls remained fully occupied, with gross retail rental income rising by 3% to HK$3.77 billion. Pacific Place saw a 15% increase in retail sales, marking its strongest May on record, driven by a surge in luxury goods sales among local shoppers and tourists. Similarly, Wharf REIC benefited from a recovering tourism sector and increased discretionary spending, maintaining 92% retail occupancy at Harbour City and 95% at Times Square.

Looking ahead, Wharf anticipates steady inbound tourism and a stabilizing residential property market as key factors that will bolster consumer confidence and domestic spending, reinforcing the resilience of its property portfolios.