Wednesday, June 20, 2012
HK Land: Barclays expects Hong Kong's Central office rents to lag any overall market recovery due to the continued decentralization trend, the financial-service sector employment concentration and concentration of vacant and 'excess' space in Central Hong Kong. Notes Central Grade-A office vacancy was 4.3% at end-May vs 3.5% for the overall market. Says, the diminishing availability of low-cost Central options should translate into pressure for HK Land's portfolio, but near-term low supply and prime spaces' high pre-commitment rate remains supportive of office rents and should prevent any dramatic decline in rentals. Also sees further downside risk to HKL's increasing exposure to China residential development, currently at 13% of NAV. Raises HKL's TP to US$6.04 from US$4.40 after removing assumptions of a hard-landing for Hong Kong's economy, but keeps an Equalweight rating. The stock is down 0.5% at US$5.77.