China Merchants Commercial Real Estate Investment Trust reported unaudited operating statistics for the three months ended 31 March 2024. For the quarter, the economy continued to recover and the outlook for landlords is less
dire. The government continued to send positive signals through a series of adjustment measures, including boosting investment, improving the business environment, and easing regulatory policies. Nonetheless, the domestic economy hampered by many external instabilities and lackluster domestic demand remains in a critical period of transition and upgrading. The pent up supply of new office buildings coming on stream remains much greater than any improving demand, leading to the continued decline of Grade-A office rents. Against this backdrop, company has adopted more a more flexible approach to asking rents based on market realities. Accordingly, compared to the previous quarter the average occupancy rate of property portfolio has improved somewhat while passing rents have generally softened. Cyberport Building and Onward Science & Trade Center saw the highest rise in occupancy rates among the six properties, up 7.4% points and 6.7% points respectively to 88.8% and 88.6%. The occupancy rate of Technology Building 2 rose from 96.6% to almost full occupancy. The occupancy rate of Technology Building remained at 100%. However, the occupancy rate of New Times Plaza fell 4.1% points to 85.5% as the Nanshan Grade-A office market remains highly competitive. For this year, company will continue to implement rent concession strategies at New Times Plaza to attract more cost-sensitive tenants; this company believe will promote uptake and help maintain occupancy at current levels. In terms of passing rent, Technology Building was the only property with an increase of RMB 3.8 per sq.m. to RMB 137.4 per sq.m. The passing rent at Technology Building 2 and Cyberport Building, other two Grade-B properties, decreased marginally. As a result of the strategy to prioritize occupancy for Grade-A offices, the passing rent at Onward Science & Trade Center recorded a 2.9% decrease compared to previous quarter, from RMB 301.4 per sq.m. to RMB 292.7 per sq.m. At New Times Plaza, there was a more substantial 9% drop from RMB 173.9 per sq.m. to RMB 158.3 per sq.m. There was a noteworthy 19.7 percentage points increase in occupancy rate to 93.4% at Garden City Shopping Centre following its year long upgrading and renovation exercise. However, the passing rent decreased by 14.4% to RMB 130.4 per sq.m. from RMB 152.3 per sq.m. in the previous quarter. The decrease was attributable to the favourable terms and lower rent rates offered to secure reputable anchor tenants for the mall's reopening, as well as attract other new tenants that optimize the trade mix of the mall. For the rest of 2024, company will focus on boosting tenant sales by systematically improving shopper traffic through marketing, promotion, events and better customer service. This enhancement of the mall's competitiveness will lay the foundation for a rise in rental income in the medium term.