Swire Properties signed office leases at an average 14 percent discount to expiring rents across Taikoo Place, excluding its newest tower, in the first nine months of 2026, failing to catch Central’s rebound.
The negative rental reversions covered 934,991 square feet of new and renewed tenancies through September, according to the developer’s quarterly operating statement released on Thursday.
Occupancy across the established Quarry Bay portfolio edged up to 90 percent from 89 percent at the end of 2025. Two Taikoo Place, the one-million-square-foot tower opened in September 2022, remained stuck at 80 percent occupancy at the end of September. That figure was unchanged from June, though higher than the 73 percent recorded at the end of last year.
Discounts Spread Across Island Portfolios
Price cuts were not isolated to Hong Kong East. At Pacific Place in Admiralty, on the edge of Central, Swire recorded negative rental reversions of 12 percent through September, even as occupancy rose to 97 percent from 96 percent at year-end. In leasing terms, rental reversions track the rate difference between incoming leases and expired contracts rather than prevailing headline rates.
Within Taikoo Place, One Island East and One Taikoo Place together logged negative reversions of 13 percent, with occupancy rising to 92 percent from 91 percent at the end of 2025. Other established towers across the Quarry Bay hub booked average reversions of negative 14 percent, with occupancy moving up a point to 89 percent.
The landlord secured major commitments during the period, including a 200,000-square-foot renewal by BNP Paribas and a renewal and expansion to 83,000 square feet by Prudential Hong Kong. FWD also committed to 330,000 square feet for ten years. None of those deals prevented contract values from resetting lower.
Central Pulls Divergent District Numbers
The pricing drag highlights a sharp geographic split across Hong Kong commercial property. Across the city, Grade A office rents rose 0.7 percent in September from August, driven by a 1.6 percent increase in Central, based on JLL data. Citywide vacancy fell for a fifth straight month to 12.4 percent, the lowest level recorded since May 2023.
Vacancy in Central fell to 7.2 percent in September from 7.8 percent in August. In Hong Kong East, vacancy widened to 14.3 percent from 14.1 percent.
Agency figures from Knight Frank show Central net effective rents jumped 22.4 percent year on year in the third quarter. Quarry Bay rents dropped 4.4 percent over the same period, despite inching up 0.2 percent from the second quarter. The gap leaves decentralized landlords exposed to prolonged cash-flow drag while core financial district blocks take the initial tenant recovery.
Retail Cash Flow Offsets Corporate Leases
Swire found financial ballast in consumer spending. Across mainland China, tenant sales at Beijing’s Taikoo Li Sanlitun surged 59.8 percent year on year in the first nine months, reaching 100 percent occupancy. Sales at Shanghai’s HKRI Taikoo Hui climbed 52.6 percent, with occupancy at 97 percent.
Taikoo Li Chengdu recorded an 11.3 percent sales gain, while Taikoo Li Qiantan in Shanghai rose 10.2 percent. Both developments stood at 98 percent occupancy at the end of September.
Hong Kong retail assets also held firm. Pacific Place tenant sales grew 14.8 percent over the nine months, Citygate Outlets rose 14 percent, and Cityplaza gained 2.3 percent. All three shopping centres maintained 100 percent occupancy.
Capital Recycling and Redevelopment Timeline
Consumer gains are steering Swire toward Chinese public investment markets. The developer is actively reviewing domestic real estate investment trusts to unlock cash from mainland properties, with no specific seed assets or public listing timetable determined yet.
Work also continues on its home turf. Swire and Chinachem Group have detailed a plan to build a 27-storey office tower by combining Swire’s Sea View Building and Hoi Wan Building sites with the adjacent Chinachem Exchange Square. The 35,000-square-foot combined site will support 500,000 square feet of gross floor area, including a retail podium, subject to planning approval.
Swire and Chinachem scheduled construction to begin in 2027, with completion targeted for 2032. On the mainland, Swire secured an occupation permit for Phase A of CDF Taikoo Li Sanya in August and for the west parcel of Taikoo Place Beijing in September.
