Other properties to be rebuilt include Dragon Seed Building at the junction of Queen's Road Central and Li Yuen Street East, while potential redevelopment candidates include Ritz Carlton Hotel, Ananda Tower, and towers one and two of Crocodile House.

Jeffrey Chan, an executive director of Luk Hoi Tong, said in view of the optimistic outlook for the office market, the redevelopment aimed to upgrade the property, which was built in early 1960s. The redevelopment is also prompted by the underutilisation of the property.

The plot ratio has not been fully utilised and redevelopment can maximise the value of the site, according to Mr Chan.

With a site area of about 10,000 square feet, the building, to be completed in three years, would provide 150,000 to 160,000 square feet of gross floor area, he said.

'It will have retail space from the basement to the third floor,' he said.

The building is designed by Rocco Design, the architect of One Peking Road in Tsim Sha Tsui. It will be a modern edifice emphasising lighting and transparency with the use of glass panels.

Mr Chan said the company hoped to improve the building's tenant mix, from small local tenants to international companies that can take up whole floors of space.

The company also hopes to lure big retail brands by providing them two-floor duplex shops.

Existing rents at Luk Hoi Tong's office properties range from HK$20 to HK$30 per square foot but property consultants expect the company to see these jump as much as fivefold.

Alan Lok, senior director of office services at CB Richard Ellis, expects office rents in the redevelopment project to reach HK$100 a square foot in terms of net area, as York House, the only new office supply in Central, fetched HK$120 a square foot.

Alnwick Chan Chi-hing, executive director of Knight Frank, said redeveloping the building was justifiable as its office space was inefficient and the retail space not well-developed.

'The building has a long frontage on Theatre Lane, which could attract international brands to open retail shops,' he said.

Mr Alnwick Chan believes many landlords redevelop and renovate their office buildings in Central because there was no new office supply.

Colliers International research and consultancy director Simon Lo said: 'It will be the first time over the last 20 years that there will be no new office supply in Central in two years. You can imagine how tight office supply is in Central.'

Citigroup Property Investors acquired Ananda Tower and towers one and two of Crocodile House in Central for about HK$1.52 billion last month.

The offices, at Connaught Road Central near Hang Seng Bank Building and One International Financial Centre, have a site area of about 12,000 square feet.

Property agents expect Citigroup to be studying the possibility to redevelop the three buildings into a grade A office property with a total gross floor area of 18,000 sq ft.

Lai Sun Development also wants to redevelop the Ritz-Carlton hotel into an office building for greater returns.

New World Development has demolished Dragon Seed Building and six old buildings nearby. The site will be developed into a 28-storey office building with a gross floor area of 132,200 sq ft. The office block is scheduled for completion in 2009.

Meanwhile, a joint venture among Morgan Stanley, Global Gateway and Pamfleet (HK) has planned to invest up to HK$200 million on the renovation of the Hang Seng Building. The work is scheduled for completion in the middle of next year.