Views differ on ICC as core business district
The decision by US investment bank Morgan Stanley to move its Asia-Pacific headquarters from Central to West Kowloon has the market wondering if the new reclamation area will become an extension of the core business district.
Some property consultants believe the move possibly heralds another Canary Wharf - a London dockyard area successfully transformed into a financial centre. Others say the analogy is overoptimistic and that West Kowloon will never become a new Central.
Office rents at Kowloon Station - now consisting of just the International Commerce Centre where Morgan Stanley said last week it would lease 10 floors or 350,000 square feet - are expected to leapfrog Causeway Bay to become the city's third highest.
The 2.5 million sq ft ICC - equivalent to 11/2 times the Exchange Square development in Central - will be completed in 2010. The 118-storey ICC will be Hong Kong's tallest office building.
It will be part of the Kowloon Station development packages five, six and seven, of which one million sq ft of shopping space will be taken up by Elements, one million sq ft to be occupied by the Ritz-Carlton hotel, W Hotel and serviced flats for lease. The Cullinan will offer one million sq ft of luxury residential properties for sale.
Office rents at Central have reached HK$120 per square foot and rank as the city's most expensive, followed by Admiralty. ICC only charges an average of HK$35 per square foot.
Andy Yuen Chun-yin, a director of business space at DTZ, said the area could follow the mode of the Canary Wharf development.
Canary Wharf took at least 11 years to transform into a financial centre from a wharf after the first phase was completed in 1991.
Mr Yuen believes Kowloon Station and future commercial developments nearby will potentially become an extension of Central. 'But it may take about 10 years,' he said.
The area and its transport system are still immature, while ICC is the only office building there. In Central, Hongkong Land alone has an office and retail portfolio of five million sq ft.
An official at the Planning Department who was involved in planning the area said: 'A traditional commercial area like Central becomes a lifeless city after people leave work at night. To avoid a similar situation, the development of Kowloon Station includes residential projects.'
But development plans for the area adjoining Kowloon Station are not yet finalised. According to the initial plan, the West Kowloon cultural district in front of Kowloon Station will have office developments.
The driving range now operated by City Golf Club, whose lease expires next year, could be developed into commercial properties, said Louis Kau Kin-hong, a senior town planner at the Planning Department.
'But there's no timetable at the moment,' he said.
With the two sites next to the driving range marked as a terminus of the planned Kowloon Southern Link in 2009 and the Guangzhou-Shenzhen-Hong Kong Express in 2014, Kowloon Station will turn into an interchange between the city and the mainland.
Kowloon Southern Link, which links East Tsim Sha Tsui Station and West Rail Nam Cheong Station, will cut travelling time between Kowloon Station and Tsim Sha Tsui East.
Mr Kau believes the area can become a key commercial district as it is linked to Central and the airport, as well as to the New Territories and the mainland. But Knight Frank executive director Mark Bernard said the area could not replace Central.
'The ICC will be a landmark building, but people looking at it as a new Central, I think, is a little bit optimistic,' Mr Bernard said.
Prime location, accessibility, and high-quality office premises are crucial to attracting financial institutions.
Quality development might not be a problem at ICC as the developer said the building would have the same quality as International Financial Centre in Central, he said.
Central and Admiralty are the core business districts, making them the most expensive for office leasing in Hong Kong.
The breakthrough came for Kowloon Station after Morgan Stanley rented 10 floors in ICC, a Sun Hung Kai Properties project.
Mr Yuen said leasing transactions encourage other financial houses to consider moving into ICC.
He said rents could rise to HK$50 per square foot from HK$35 when the district matures.
Lee Wee Liat, the head of research for Greater China at Jones Lang LaSalle, said rents at ICC would grow after the infrastructure was improved and a good mix of tenants achieved.