and says further redevelopment of its ageing Central office portfolio is unlikely until its $2.3 billion Swire House project is completed in just over five years.

The demolition of the 35-year-old Swire House and construction of a modern office tower in its place, a move long expected but only announced last week, will not be completed until 2003.

Hongkong Land executive director Ian Hawksworth said it would be "five to 10 years" before the company started considering redeveloping its other Central sites.

"We think there is a strong case for our buildings," he said. "Certainly, apart from certain renovation work, I would not expect there will be another Swire House."

The announcement should ensure some of Central's oldest buildings are still standing well into the next century.

The decision by Cathay Pacific to leave the building - it occupies about 30 per cent for the new airport at Chek Lap Kok is the main reason the company decided to refurbish Swire House.

"When you have a building that is income producing you have to have a strong financial case to take that income stream out of your portfolio for the year," he said.

At today's prices, the five-year project will cost Hongkong Land about US$300 million in redevelopment costs.

Lost rental income will push up the overall cost by a further US$195 million.

Hongkong Land owns about 40 per cent of the office space in Central. Much of the stock is more than 20 years old.

As well as the 370,000 square foot Swire House, there is Alexandra House (330,000 sq ft), Jardine House (656,000 sq ft) and the Princes Building (409,000 sq ft).

BZW analysts said recently that Exchange Square 3 was the only building in the company's portfolio to meet the demands of modern financial clients.

Mr Hawksworth said the need for a range of buildings in Central, serving a range of tenants, would ensure the survival of the Hongkong Land portfolio. Acknowledging criticism that much of the ageing stock would not be suitable for banks and brokers, he said many tenants were lawyers and accountants who did not require such modern facilities.

"It doesn't make sense to start looking at bringing down some of the other buildings," he said.

"Not everybody is going to pay the same rents that investment banks are going to pay. The other buildings are all performing very well."

Once Swire House is demolished, Princes Building, built in 1965, will be the oldest in the Hongkong Land portfolio.

But Mr Hawksworth said: "There is a good case for Princes Building going forward. Over the next five to 10 years we will be looking at its future."

He said 21-year-old Alexandra House was "very unlikely" to be redeveloped in the near future, while of Jardine House - one of the largest office buildings in Central and built in 1973 - he said: "I can't see a compelling need to redevelop."

Work on the 30-floor building that will replace Swire House, provisionally known as 11 Chater Road, will start in October next year.

Goldman Sachs property analyst Benjamin Chen said the decision to demolish the building was unlikely to signal a redrawing of the Central skyline.

It was more likely to signal the renaissance of Hongkong Land, he said.

"I think for Hongkong Land it is definitely the starting point," he said.

"They have been quiet for quite a long time.

"This is to demonstrate their commitment to Hong Kong."

As for other developers, the threat of oversupply was likely to prevent them from redeveloping, said ING Barings property analyst Manfred Ho.

Even taking Swire House out the office market would leave an oversupply of office space in Central next year of one million square feet.

Sites such as Cosco Tower had only sold 70 per cent of their floor space, while most of the new Cheung Kong Centre remained unsold, Mr Ho said.

"The Furama also may be developed in the near future," he said.

"We can also see the Central station development by Sun Hung Kai and the Henderson group."

If other developers were to decide to redevelop at the same time, it would create the danger of flooding the market with office space, depressing rents.

"I think they will do it one by one," Mr Ho said.

He suggested Cheung Kong might redevelop the old Bank of China Building once it had completed the Cheung Kong Centre in 1999.

Over the next two years, a further three million square feet in Central office space will be available, while Tamar site 2 will make 500,000 sq ft in space available in both 2000 and 2001. The 1.8 million sq ft MTRC Central station is also due to open in 2001.

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