The market average vacancy rate in the prime business district is 7 percent, according to the company.

In 2000, Hongkong Land's vacancy rate in Central was as low as 2.8 percent.

Office rents in the district's core have more than doubled in the past 12 months, property consultants Knight Frank said.

Overall Grade A office rents in the territory jumped 20 percent in the second quarter of the year to an average of about HK$30 per square foot per month, a level last seen in 2000, said Knight Frank. Central remained the most expensive area, with monthly rents as high as HK$75 psf.

The vacancy rate in the district continues to fall as financial institutions and business services firms expand, the consultancy said.

Despite having five million square feet of office and retail space in Central, Singapore-listed Hongkong Land, part of the Jardine Matheson group, failed to derive much benefit in the first half. Its problem was one common to SAR landlords - rent concessions, granted during the slump that followed the Asian financial crisis of 1997-98, which have yet to run out.

The company had first-half underlying profit of US$105 million (HK$819 million), up 2 percent from US$104 million a year earlier.

Hongkong Land follows international financial reporting standards, which require property revaluations to be reflected in the profit and loss account.

Thanks to a substantial rise in the value of its investment properties, Hongkong Land's net profit was US$1.195 billion for the first six months, compared with US$783 million in the first half of last year. Net assets per share jumped 21 percent to US$2.83.

Hongkong Land expects office rents to increase in the second half.

As new leases began to be negotiated at higher rates, net rental income in the first half rose when compared with the second half of last year.

``Rents are moving in the right direction, but the increase won't be significant in terms of the bottom line until 2006,'' chief executive Nicholas Sallnow-Smith said.

Hongkong Land's tenants typically sign three-year leases.

Meanwhile, Singapore-listed Mandarin Oriental International, the luxury hotel arm of Jardine Matheson, reported first-half profit jumped 10 times to US$55.3 million, compared with a restated US$5.5 million a year ago, due to rising room rates and a one-time gain from selling a hotel stake.