HONGKONG Land envisages building a fourth Exchange Square office building if it clinches the development rights to build above the new airport railway's planned Central station. The new building would be called Four Exchange Square and built on reclaimed land where the old outlying ferry piers used to be, bordering the three existing towers. Executive director Jonathan Petit said Hongkong Land had submitted an expression of interest in the project to the Mass Transit Railway Corp (MTRC). He said the proposed new office block would become the southwest tower adjoining Three Exchange Square and could be integrated with the existing Exchange Square complex. The 600,000-plus square foot tower, part of the first phase property development for the Central station, could be turned into Four Exchange Square, he said. The Exchange Square development now provides 1.4 million sq ft of office space in three towers and 88,000 sq ft of retail space in The Forum and podium. Analysts said Hongkong Land's strong interest in the Central station's development was not only because it represented a prime office location, it was also a vote of confidence in Hong Kong and reflected its determination to maintain its dominance in the core business district. Mr Petit noted that the group's confidence in the Hong Kong market was already evident because it was the biggest landlord in Central with about five million sq ft of properties in its portfolio. He said Hongkong Land had not formed any consortium at this stage for the Central station's development, but he did not rule out the possibility of partnership. The group had held discussions with other developers in this respect, he said, adding that the make-up of any consortium was liable to change in the course of official tendering. Fierce competition is expected in the race for the Central project. All the property giants including Cheung Kong, Sun Hung Kai Properties, Henderson Land, Sino Group and Great Eagle have shown interest. In the tendering, expected to open by the end of this year, developers can choose to bid for the first phase development only, or for the whole project. Phase one consists of the southwest tower and nearly one million sq ft of retail space, due to be completed in 2000. The whole project, estimated to cost $40 billion, includes more than two million sq ft of office space in three towers, the retail space, and about one million sq ft of hotel space. Mr Petit said Hongkong Land's interest was primarily in the first phase development as it had no interest in the hotel project. He also expressed concern about the large size, design and viability of the nearly one million sq ft, six-level retail podium, and this concern might eventually lead to a partnership with other developers. According to his estimate, the first phase development would cost about $12 billion to $14 billion, depending on Government land premiums. Mr Petit said the new airport railway would be a tremendous endorsement of Central's position as a financial and business centre as well as improving Hongkong Land's existing property portfolio. It would take only 23 minutes from Central to the new airport at Chek Lap Kok through the airport railway, he said. The airport check-in facility incorporated in the new station would facilitate companies operating in Central where businessmen could check in their luggage in the morning and go back to work in offices before actually departing, he said. Competition from new office supply expected from the Central reclamation programme did not worry Mr Petit as he said those buildings would come on the market in phases over many years. Mr Petit also said existing office redevelopments in core Central business areas, such as Shell House, were relatively small projects which could be absorbed by the market comfortably. But the two large-scale office projects being developed by the Land Development Corporation near Sheung Wan, providing more than two million sq ft of office space, appears to be more of a problem for Hongkong Land. Mr Petit said it was not clear whether the office spaces in the two projects would be for strata-title sale or for rental purposes. If they were for strata-title sale, it would have less impact on Hongkong Land's portfolio, he said. Mr Petit said the company did not intend to sell any properties in its portfolio, which maintained an occupancy of 98 per cent with increases in average revenues. Average rents for its office properties were $58 per sq ft a month, up from $49 per sq ft in 1994, and those for retail premises were $112 per sq ft, against $108 per sq ft last year, he said. The upward rental movements were attributed to the fact that leases for renewal in 1995 were those leases signed in 1992 when rents were at much lower levels. Mr Petit expected to see upward rental movement in 1996, but indicated there might be some downward adjustment in 1997 when leases signed during the booming period of late 1993 through to the end of the first half of 1994 were due for renewal. Future take-up of office premises would also depend largely on the economy of Hong Kong and China, he said. Hongkong Land had appointed a New York consultancy to help improve its services, including communications and power supply for Edinburgh Tower and Gloucester Tower in The Landmark, he said.