Hong Kong car park site sells for record US$3b
Rare redevelopment opportunity sees local heavyweight developers turn out in force to beat mainland upstarts
Henderson Land Development snapped up a rare commercial site in the heart of Hong Kong’s central business district on Tuesday for a higher-than-expected HK$23.3 billion (US$3 billion), setting a fresh record for land sold by the government in the city.
Billionaire Lee Shau-kee’s company outbid eight other developers including local giants Cheung Kong Property Holdings and Sun Hung Kai Properties to win the site in Central, where office vacancy rates are less than 2%. The price beat the US$2.86 billion highest estimate of analysts polled by Reuters.
The site at Murray Road, the only plot of large-scale commercial land tendered for sale in the district in two decades, was widely seen as a prime spot for a company headquarters thanks to its location and gross floor area of more than 42,000 square meters.
The site was until May 1 a public car park surrounded by skyscrapers, including ones owned by Li Ka-shing’s CK Hutchison Holdings and Cheung Kong Property and Bank of China’s local headquarters.
The latest result halts a winning streak by mainland Chinese developers marking their territory in the former British colony, where government intervention is minimum and financing costs are low.
Mainland Chinese firms have piled in to snatch up high-profile office towers in Hong Kong, with property giant China Evergrande Group splurging a record-breaking HK$12.5 billion for a building in Wan Chai and state-owned China Life Insurance buying an office tower in Kowloon’s Hung Hom district for HK$5.85 billion two years ago.
They have also been instrumental in maintaining Central’s tight rental market. Mainland companies doubled their presence in the district in less than a decade, taking up 21% of all floor space leased in the Central Grade A office market in early 2016, versus 10% in 2009, according to real estate services firm JLL.
The rental gap between the most and least expensive grade A office buildings in Hong Kong can be as wide as HK45 per square foot (HK$480/sq m) per month, which translates into annual rental savings of as much as HK$174 million for a tenant moving a 100,000 square foot office outside of Central, according to JLL.
European and US financial firms, in efforts to cut costs, reduced their presence in the greater Central area by 146,000 square feet and 28,000 square feet respectively in the three-year period to March 2016, according to a November report by property consultancy CBRE.
Their Chinese counterparts increased their office space in the same district by 633,000 square feet, taking up 73% of the total banking and financial sector space expansion in the area.
Two mainland Chinese developers also shattered the city’s record for the most expensive piece of residential land ever sold when they jointly bought an oceanfront site on southern Hong Kong island at HK$16.9 billion in February.