Wheelock decides to develop site into prime office-retail complex due to low bids Wheelock and Co has scrapped plans to sell Lane Crawford House in Central and will instead redevelop the 28-year-old building into a prime office and retail complex. Despite keen interest in the site, the conglomerate made the decision because none of the eight bids it received from local and overseas investors when the tender closed on September 12 came up to its target price of $2.5 billion. The highest bid was $2.2 billion. 'The sale response was good, but it didn't quite meet our expectation,' Wheelock's executive director David Lawrence said. 'It's a very good site, so we will go ahead and redevelop it ourselves into an international-quality retail and office building.' Mr Lawrence rejected market speculation that Wheelock's tender was only aimed at testing the market appetite for the site. He said the company would be able to realise a better value for the 12,286 sq ft Queen's Road site, where rents had surged 39 per cent in the first half. However, Wheelock does not have a projection of how much rental revenue it can achieve from the new commercial building, which will be completed in 2009. Built in 1977, the 24-storey Lane Crawford House has 195,500 sq ft of gross floor area and generates annual rental income of about $23.64 million, mainly from its offices, according to Wheelock's tender brochure. It once housed Lane Crawford's flagship store. Under the new plan, Wheelock hoped to start work on the site by the end of next year after clearing the leases with existing office tenants, Mr Lawrence said, adding that the company would be meeting architects in the next few weeks. Hong Kong ranks as the second-most expensive city in Asia to rent an office after Tokyo, according to property consultant Cushman & Wakefield. Grade A rents are expected to climb even further in the next two years because of the lack of fresh supply and expanding business activity. 'The trend within the finance and insurance sector is to expand internally and this requires more office space, putting a squeeze on increasingly scarce space,' Colliers International associate director Wendy Lau said. The only new grade A office space coming on stream in Central this year is the AIG Tower, built on the former Furama hotel site, but most of its 430,000 sq ft gross floor area has been pre-leased. Next year, Hongkong Land Holdings will have its Landmark East extension ready with a net floor area of 119,000 sq ft. This will be followed by Yu Tai Hing's 28-storey office-retail tower with a gross floor area of 186,092 sq ft at 92-94 Queen's Road Central, near Lane Crawford House. Wheelock's share price has risen 9.5 per cent since it unveiled plans to sell Lane Crawford House on July 26, outperforming the 1.44 per cent growth of the benchmark Hang Seng Index for the same period. The stock last traded at $14.40 on Friday.