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SCMP Reporter

The 630,000 sq ft mall is being upgraded to better suit families and attract popular brands that will double its rental income

Old retail arcades in non-core shopping districts are hidden gems that could provide attractive and stable rental returns once they have had a commercial makeover, according to two leading real estate investors.

The investors, Morgan Stanley Real Estate Funds and pan-Asian real estate fund Pamfleet (HK), are partners in a consortium that has launched a $100million refurbishment of the 13-year-old Kowloon City Plaza (KCP) in Kowloon City.

It is an ambitious move to breathe new life into one of Hong Kong's oldest districts, as well as  doubling the rental income.

Under the plan, the mall, which is only 60 per cent occupied at present, is braced  for a modern interior and exterior revamp to catch up with the fast-changing retail market. Its tenant mix will be upgraded with new food and beverage, entertainment and fashion retailers.

Rather than competing for shoppers' top dollars, KCP was being positioned as  a niche local destination to accommodate the growing residential community in southeast Kowloon, the consortium said.

'We won't be right at the top end. KCP will be much more a mid-market and family-based local centre for popular brands rather than named brands,' said David Holdsworth, managing director of Pamfleet (HK).'People like a lot of choices and there is room for a wide variety of shopping centres in Hong Kong.'

From Swire Properties' Festival Walk in Kowloon Tong to Wharf Holdings' Hollywood Plaza in Diamond Hill and Sun Hung Kai Properties' APM Mall in Kwun Tong, shopping malls located in non-core shopping districts are popular spots in the city.

Despite KCP's lower market positioning, Robert Naso, executive director for Morgan Stanley Real Estate Funds, was confident the mall would be able to deliver a stable rental revenue once the refurbishment had been completed.

He said the company was in talks with prospective tenants for about 20 per cent of the retail space.

Internal works would be completed by May and the exterior in September, Mr Naso said.

Aedas, one of the dominant architects in restructuring shopping malls in Hong Kong, was handling the refurbishment.

Built in 1993, KCP is the biggest shopping mall in the district at 630,000 sqft. It has seven storeys of retail space and 400 parking spaces. It was acquired by the consortium from Paliburg Holdings in 2004.

Traffic at the shopping centre plunged after the airport was relocated to Chek Lap Kok in 1997. The biggest tenant is ParknShop, which rents 14,000 sq ft of space.

DTZ Debenham Tie Leung research director Alva To Yu-hung said: 'The redevelopment of the old Kai Tak Airport should benefit retail properties like KCP in the longer term.'

Kowloon City, famous for its Chiu Chow and Thai cuisines, will get a facelift as the Kai Tak site is redeveloped.

Three concept plans proposed by the government include a stadium and multipurpose complex, a cruise terminal and a promenade. An initial draft zoning plan for the redevelopment project will be released by  the middle of next year.

Of these proposals, the 'City in the Park' concept, focuses on residential housing for 128,000 people, with developments on the former runway island.

The 'Kai Tak Glamour' proposal aims to develop the site into a cruise terminal with commercial and stadium facilities, while the 'Sports by the Harbour' plan includes two stadiums - one with 45,000 seats, the other 5,000 - various recreational facilities and homes for 69,000.



$100m makeover for Kowloon City Plaza