Slow business prompts a shift in focus, with URA projects topping the agenda A slowing construction business has prompted some contractors to develop their own properties. The shift in business focus is reflected in their participation at recent land auctions and Urban Renewal Authority (URA) redevelopment projects, and the expansion of their property portfolios. Chun Wo Holdings, which entered the construction business in 1968, is among the keenest of players who are diversifying their core construction business. The firm will launch its first solely owned development project atop Choi Hung MTR station this year, and is eyeing projects that involve more complex construction processes. In 2001, the firm outbid Sino Land and Nan Fung Development to win development rights for the residential/park and ride project in Choi Hung, which involved complex construction above the MTR station. It was the first time an MTR station development had been awarded to a contractor and not a developer. Chun Wo Holdings managing director Clement Kwok Yuk-chiu said business diversification was a necessary step to survive in a shrinking construction business, with decreasing infrastructure and a drop in the number of public works up for tender. 'Hong Kong's construction industry reached its peak with the completion of the airport at Chek Lap Kok. We have to diversify our business in the long term.' The suspension of government subsidised housing hurt business opportunities for construction firms in Hong Kong, market observers said. Mr Kwok said a vertical integration of construction and property development, which allows more flexibility in the construction process, helped the company save on time and costs. 'Of course, we are no match for some giant developers in bidding for large-scale projects, but our edge is in medium size sites that are relatively difficult to develop,' he said. 'However, when land prices peaked in 1997, our edge in engineering and construction was not significant.' Amid signs that land prices are going up again and aggressive bids are being witnessed at land auctions (with sites selling at more than 70 per cent above their reserve prices), Mr Kwok pointed out that there were alternatives in acquiring sites. 'We are very keen about the coming URA [Urban Redevelopment Authority] projects. Some of them are even more suitable for us than those released earlier this year,' he said, adding that the company was also eyeing sites in the private market. Chan Sum Construction Company, established in 1973, has adoped a similar strategy. It launched Talent Land Development in 2001 as a joint venture between Chan Sum Construction and Chung Mei International. 'Land prices are low enough to attract developers,' Talent Land Development director Timmy Chan said. 'And our traditional role as a contractor helped us bid for development projects.' In 2001, the firm developed La Mer, a luxury residential development project in Bisney Road, Pokfulam. La Mer was formerly owned by Chi Cheung Investment, and was being constructed by Chan Sum Construction. Chan Sum took over when the developer had financial problems. Being both the developer and the contractor for La Mer simplified construction and saved money, Mr Chan said. On the company's future, Mr Chan said: 'We will have projects in Hong Kong and China. In Hong Kong, we will focus mainly on government projects.' As a small construction firm, Chan Sum is interested in URA projects and sees them as the focus in the coming year. The firm has also started expansion plans in south China. It has bought a piece of land - 300,000 square feet - in Panyu, Guangdong, and has invested $180 million as the sole investor. 'We started development projects more than a decade ago and the result is encouraging,' Mr Chan said.
