Top bids for a commercial site in Kowloon Bay are likely to come in lower than previously forecast, say valuers, after the government put fresh sale conditions on the land.
Under the restrictions on the land lease, office units to be developed on the site may not be sold by strata title, and the winning bidder has to obtain a provisional 'gold' environmental rating covering issues such as energy efficiency from the Hong Kong green-building council.
"I previously forecast the site might fetch HK$3.05 billion, or HK$5,500 per square foot. But I have cut my valuation to HK$2.14 billion, or HK$3,850 per sqft," said James Cheung, an executive director at Centaline Surveyors.
The 46,253 sqft site, located on Wang Chiu Road, next to Kenning Industrial Building, could be used to develop an office building offering a total gross floor area of 555,035 sqft.
"If it were possible to sell the units by strata title, the price of the office space could reach HK$10,000 per sqft. But now, the price is likely to reach only HK$7,000 to HK$8,000 per sqft for en-bloc sale," said Vincent Cheung Kiu-cho, national director for Greater China at consultants Cushman & Wakefield.
He forecasts a top bid of about HK$1.78 billion, or HK$3,200 per sqft, and said the conditions of sale were likely to have been aimed at helping to develop Kowloon Bay into a core business area.
"Prohibiting sale of the offices by strata title and requiring them to be built to a high environmental rating will result in a better building quality and better management," he said.
Alnwick Chan Chi-hing, head of valuation and professional services at Knight Frank, said the sale conditions would limit the number of buyers showing an interest in the site.
"Developers will have to be prepared for a long-term investment. This means small developers are likely to be reluctant to join in the bidding," he said.
He expected the site could fetch HK$2.11 billion, or HK$3,800 per sqft, based on a 5 per cent discount to allow for the added sale conditions.
Also up for tender this week is a 86,898 sqft residential site in Sai Kung near the Sai Kung Outdoor Recreation Centre that could be developed into an eight-storey residential project with a gross floor area of 173,796 sqft.
Vincent Cheung said the site was likely to be secured with a bid near HK$782 million or HK$4,500 per sqft.
The Lands Department requires the development to comprise at least 270 flats and this has affected the value of the site because flats will be small and revenues for the developer lower.
James Cheung did not expect developers to bid aggressively, despite an active recent market.
"Many large developers bought many sites in the past few years. They have many projects on hand already," he said.
The tenders for the two sites will close on Friday.