Sino Land, Hong Kong's fifth-largest developer by market value, has won a 16 per cent reduction in the land premium it must pay for the Po Hing Centre redevelopment project in Kowloon Bay, sources said. Sino Land agreed to pay a levy of HK$450 million, or HK$1,285 per square foot, after appealing against an original HK$540 million, or HK$1,600 per square foot, premium sought by the Lands Department in the first quarter, the sources said. The premium, paid for the right to convert the industrial site into a commercial development, gives the project a redevelopment cost lower than the present average price of new offices in the area and is in line with market expectations, according surveyor Albert So Chun-hin. Sino Land is increasing its presence in Kowloon Bay as new commercial and office projects in the former industrial area and nearby Kwun Tong attract banks and other institutions to set up back offices, driving up prices. Po Hing Centre, a 20-year-old, nine-storey industrial block at the junction of Wang Chiu Road and Lam Hing Street, will be redeveloped into an office building with a gross floor area of 350,000 sqft. The redevelopment will cost more than HK$2,300 per square foot, including a construction cost of HK$1,000 per square foot and the land premium, Mr So said. 'The average price of new offices in Kowloon Bay is more than HK$3,000 per square foot,' he said. Even so, 'the project will have to provide retail space to ensure a reasonable profit'. Rents are also significantly higher at new developments in the area. One Kowloon, the newest office project in Kowloon Bay, has realised rents of between HK$19 and HK$21 per square foot. Rents at Po Hing Centre range between HK$7 and HK$10 per square foot. The centre will be Sino Land's second Kowloon Bay commercial project. The developer bought a site there in March last year for a higher than expected HK$1.82 billion, or HK$2,988 per square foot. Enterprise Square Three, a new development by Kerry Properties, fetched HK$5,300 per square foot in the secondary market. Property prices at older buildings such as Chevalier Commercial Centre and Telford Plaza range between HK$3,000 and HK$4,000 per square foot, transaction data at Midland Realty shows. Sources said the government will settle the land premiums of projects owned by Henderson Land Development and Chinachem Group in the next two months.
