Opinion: Is a Kowloon East CBD for real or just a planner’s dream?
New office supply growth in East Kowloon is seen to have surpassed the pace of infrastructure development in the area, but it remains to be seen if the area will take off as the next CBD
The new HKSAR administration may offer new directions for Hong Kong, but we will have to wait and see. Being a veteran of the commercial leasing sector, forgive me for having my own expectations (if not high) for the commercial property market.
The idea of Kowloon East becoming a CBD2 is definitely not something new, but will this idea be realised or is it just a planner’s pipe dream?
The long-term severe shortage of commercial space in traditional core business districts has been pushing developers and tenants to look for office space in rising star locations such as Kowloon East, Wong Chuk Hang and Cheung Sha Wan for some time.
Carrie Lam Cheng Yuet-ngor, the chief executive-elect who, let’s not forget, used to be in charge of the Development Bureau, was one of the core members to advocate turning Kowloon East into CBD2. This is one reason why I am inclined to hold high hopes for the upcoming development blueprint for this neighbourhood. Looking at what the government has proposed to date, the aspiration is to build a business location on a par with Central. Problems with realising this vision are already apparent, however, as new office supply in Kowloon East has surpassed the speed of local infrastructure development and the legacy transport network is currently unable to support the traffic generated by the large number of office tenants who already call the area home.
As temporary oversupply of commercial space in Kowloon East looks likely, the government has recently placed more emphasis on launching sites in Cheung Sha Wan and Wong Chuk Hang, putting a “brake” on fast-developing Kowloon East. Call me a worrywart, but this situation, while expedient in the short term, may hinder the development of Kowloon East in the long run. In stimulating the development of commercial space, tenant mix plays an extremely significant role.
If we take a look at the tenant mix in Kowloon East, most occupants are what we call “support-function business arms” such as accounting functions or human resources while traditional CBDs such as Central and Admiralty still house the front-of-house staff who serve clients directly. This is shaping an impression that Kowloon East is a second-tier consideration for tenants in finding commercial space and any equivalence of this neighbourhood with the traditional CBDs or even an international CBD may not be realistic.
If the government were to take the lead at the critical juncture, however, and move some of its own core activities to Kai Tak such as, let’s say, the Department of Justice, this gesture could potentially have a huge impact and cause legal-related businesses to seriously consider the area, helping to restore its flagging credibility as a front office location.
Generally on the supply front, the existing shortage of sites is nowhere more apparent than in Central where government is tendering the Murray Road Multi Storey Car Park (tenders close May 12) with a total gross developable floor area of 465,000 sq ft, which could easily sell for another record high price. This is the most eye-catching piece of land to be sold this year and the first commercial site in the traditional core business area to be tendered since 1996, when the Government launched the site where iFC now stands. Central badly needs new stock as rents in the district are at world beating levels and availability is at an all-time low. It is highly possible of course, that the site will be sold to a mainland end-user, in which case the building will do little to alleviate the chronic lack of suitable grade A premises.
There is no doubt that the new administration will bring substantial changes to Hong Kong, and the commercial sector is no exception. Local, and increasingly mainland, developers will continue their spending spree on commercial sites in the territory as new districts such as Kowloon East and Wong Chuk Hang emerge and land values in older districts test new highs. Let’s all watch closely to see if the development of our commercial sector enters a new era as it promises to do.
Ricky Lau is deputy managing director and head of office leasing at Savills