Hong Kong office rental reversions may turn neutral in 2027; Hongkong Land remains Overweight

Overview

This report summarizes J.P. Morgan's takeaways after attending Hongkong Land's company update conference call. The core conclusion is that the negative impact of Hong Kong office rental reversions has narrowed significantly and may turn neutral from 2027 onward; Hong Kong luxury retail, the Landmark flagship store, and the Bespoke VIP program are showing improvement; and Singapore operating trends are healthy, though near-term revenue is dragged by asset disposals. The report maintains an Overweight rating on Hongkong Land.

Core views

J.P. Morgan believes Hongkong Land's earnings recovery and shareholder return thesis is playing out. Hong Kong office still faces pressure from a YoY revenue decline in 1H26, but the rental reversion inflection point is becoming clearer; Hong Kong luxury retail is supported by positive rental reversions and new flagship stores; the Singapore platform is the current strategic priority; and capital recycling, fund management execution, and steadily growing dividends together support further re-rating.

Analysis framework

The report uses management's conference call updates as the main thread, breaking the analysis into Hong Kong office, Hong Kong luxury retail, Singapore business, capital recycling, fund management, Suntec REIT investment, underlying profit, and dividend policy, while using NAV discount and implied P/B levels to explain the target price.

Methodology notes

• Valuation methodsNAV discount valuation

  A Dec-26 target price of US$10.70 is derived using a 20% discount to estimated NAV, implying 0.75x P/B.

  J.P. Morgan believes this discount level is narrower than that of other Hong Kong-focused landlords because Hongkong Land has a strong willingness to enhance shareholder returns and a good capital recycling track record.

• Fundamental trackingBusiness-segmented conference call takeaways

  Management updates are split into office, retail, Singapore, capital recycling, fund management, profit, and dividends.

  This method is used to identify near-term revenue pressure, the 2027 rental inflection point, capital allocation direction, and the stability of shareholder returns.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Hongkong Land (HKLD.SI)

  Research target

  Strengths

  Offers high dividend visibility, a committed buyback plan, management incentives linked to share price performance, and a track record of capital recycling execution.

  Weaknesses

  Hong Kong office revenue may still decline YoY in the short term, while Singapore 1H26 revenue is dragged by the disposal of MBFC Tower 3.

  Comparison

  The target price corresponds to a 20% discount to estimated NAV and implies 0.75x P/B; the report says this valuation is at the higher end among Hong Kong-focused landlords.

  Risks

  The Hong Kong office market could deteriorate more than expected, or capital recycling could be value dilutive.

• Hong Kong Central office portfolio

  Core business and source of the rental inflection point

  Strengths

  Negative rental reversions have narrowed significantly, Central spot rents have improved year to date, and most 2026 lease renewals have already been handled.

  Weaknesses

  1H26 office revenue may still decline YoY due to the negative rental reversions of the past few years.

  Comparison

  Improved from -15% to -20% negative rental reversions in recent years to about -5% this year.

  Risks

  ODI restrictions and changes in tenant demand still need to be monitored in 2H26, and management has not yet provided guidance for positive rental reversions.

• Landmark and Hong Kong luxury retail

  Source of improving retail contribution

  Strengths

  Positive rental reversions, new flagship stores, accelerated Bespoke VIP projects, and strong performance in watches and jewelry.

  Weaknesses

  Luxury retail remains affected by the premium consumption cycle and travel-related spending sentiment.

  Comparison

  Relative to office, the retail segment is expected to contribute more positively in 1H26.

  Risks

  If premium consumption slows, the rental uplift from flagship stores and VIP projects may come in below expectations.

• Singapore platform/SCPREF/Suntec REIT

  Growth platform and source of revenue diversification

  Strengths

  Operating trends are healthy and rental reversions remain positive; SCPREF performance will be consolidated into overall Singapore performance, including fund investment income, management fees, and Suntec REIT distributions.

  Weaknesses

  1H26 revenue declines YoY due to the disposal of MBFC Tower 3, and LPs have recently become more cautious due to the geopolitical backdrop.

  Comparison

  The company's near-term strategic priority is to expand the Singapore platform rather than announce a large transaction in the short term.

  Risks

  If potential acquisitions, fund raising, or asset recycling are executed poorly, returns could weaken.

Key data

• Current priceUS$7.10Price as of June 26, 2026.
• Target priceUS$10.70Dec-26 target price, based on a 20% discount to estimated NAV.
• Implied upsideabout 50.7%Calculated based on the US$10.70 target price and the current price of US$7.10.
• Hong Kong office rental reversionabout -5%A significant narrowing versus the -15% to -20% negative reversion in recent years.
• Central office spot rentsup more than 5% year to dateThe report cites JLL data as supporting evidence for the narrowing negative rental reversion.
• Rental reversion inflection pointmay turn neutral in 2027 and beyondManagement is not yet ready to provide guidance for positive rental reversions.
• Capital recycling progressUS$3.6bn completed; US$4bn target by end-2027The final ceiling remains US$6bn, and selective disposals are still ongoing.
• Underlying profit growth1H26 and FY26 expected to grow about 10% YoYUnder the new basis, 1H25 underlying profit was US$230mn, with growth mainly driven by financing cost savings.
• Dividend policymid-single-digit percentage annual growthFull-year DPS guidance is unchanged, but the split between interim and final DPS may be rebalanced.
• Potential Marina One transaction referenceS$5.7bn; about S$2,822 psf; exit yield 3.9%-4.5%Estimated by J.P. Morgan's Singapore REIT analyst; if completed, the price would be about 11% lower than Asia Square 2's S$3,180 psf.

Impact & implications

If Hong Kong office rental reversions turn neutral in 2027, while Singapore platform expansion, capital recycling, and fund management execution progress smoothly, the logic for Hongkong Land's earnings recovery and valuation re-rating will become clearer. In the short term, 1H26 revenue may still be affected by negative Hong Kong office rental reversions and the disposal of MBFC Tower 3, but the profit line is supported by financing cost savings.

Risks

• The Hong Kong office market could deteriorate more than expected, preventing rental reversions from turning neutral in 2027.
• If capital recycling is executed in a value-dilutive manner, it could weaken the valuation re-rating thesis.
• The geopolitical backdrop has made LPs more cautious, which may affect fund size expansion.
• If Mainland China ODI or capital flow restrictions affect tenant decisions in 2H26, leasing activity could be dragged down.
• If Singapore platform expansion or potential acquisitions are priced too high or generate insufficient yields, shareholder returns could decline.

What to watch

• Whether 2027 Hong Kong office lease renewals truly turn neutral or positive.
• Whether ODI restrictions and tenant leasing decisions show delays in 2H26.
• Progress on Singapore platform expansion, including whether potential deals such as Marina One are completed.
• The pace of achieving the US$4bn capital recycling target by end-2027, and how the final US$6bn ceiling is executed.
• How SCPREF, management fees, and Suntec REIT distributions are disclosed in interim results.
• Whether the split between interim and final DPS is rebalanced, and whether full-year DPS growth guidance is maintained.