"Big Banks" Research: Central Hong Kong office rents may stabilize ahead of schedule, optimistic about Taidi's target price of HKD 23.9

HSBC Research published a report indicating that there are reports suggesting Alibaba-W (09988.HK) is negotiating to acquire the "One Island Center" in Causeway Bay, a 13-story office building with a total area of 270,000 square feet, at a price of approximately HKD 7 billion, equivalent to about HKD 26,000 per square foot. If the transaction is completed, it will be the largest single office building transaction in Hong Kong this year.

The bank noted that the recent surge in large-scale leasing transactions, along with the increasing market interest in office sales, reflects an improvement in market demand. However, there will still be a peak in supply from the second half of this year to the first half of next year. The bank believes that the downside risks faced by Hong Kong office owners may be lower than previously expected by the market. In an optimistic scenario, office rents in the Central district may stabilize earlier than the second half of next year.

The report also mentioned that although the unfavorable supply situation will continue to pose challenges for the office market, active financial activities driving demand improvement could provide some support for rents. Some owners have actively sought new revenue growth points, and their business improvement progress may bring surprises to the market.

In terms of stocks, Swire Properties (01972.HK) has several commercial projects set to be phased in starting from 2026, which could lay a good foundation for its rental income growth; it currently has a target price of HKD 23.9 and a "Buy" rating. However, the bank maintains a cautious view on Champion REIT (02778.HK), as its distribution per unit may continue to be under pressure; it currently has a target price of HKD 1.71 and a "Reduce" rating