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Sandy Li

Cheung Kong and Hutchison to develop prime site near SHKP's Shanghai IFC

Hong Kong developer Cheung Kong (Holdings) and its affiliate, Hutchison Whampoa, said they will spend 1.74 billion yuan on a commercial project in Lujiazui in Shanghai's Pudong financial district.

The 50-50 joint venture between the two Li Ka-shing-controlled companies purchased the prime site from Shanghai Fortune World Development for 832 million yuan.

It will spend an additional 908 million yuan  to develop it into a project of unspecified nature. With the pace of development in Hong Kong  having slowed in recent years, local developers have increasingly turned to the mainland in search of growth.

In addition to the new purchase, the two companies have bought another 13 building sites in Beijing, Shanghai, Changchun, Guangzhou, Qingdao, Wuhan and Tianjin.

The companies are paying 10,400 yuan per square metre for the 80,000 square metre site, they said.

Given the location, just a block away from rival Hong Kong developer Sun Hung Kai Properties' Shanghai IFC, 'the price is reasonable', said Albert Lau, a managing director at Savills Property Services (Shanghai).

With fewer prime building sites available in China's commercial capital, developers have been jousting for position.

'It is not bad if you can buy a prime site at market value,' Mr Lau said.

Lujiazui has been a prime focus of developers' attention as the demand for grade A office space in Shanghai soared.

Last year, Cheung Kong and Hutchison, in conjunction with the Li Ka Shing (Overseas) Foundation, bought a site at Century Avenue in Lujiazui for US$683 million. The two companies each own 25 per cent, with the rest held by the foundation.

That 50,850 square metre site will be developed into commercial, cultural and office properties.

Rents for prime office space in Pudong now run US$1 per square metre per day, Mr Lau said, adding that most quality buildings are fully rented.

Mr Lau expects the joint venture will either build offices or a hotel on the site, with a completion date  in 2010.

According to Savills, Shanghai's grade A office rents have risen 8.5 per cent for the first eight months this year.

Total grade A office supply in Pudong is about 1.21 million square metres by the end of last month. But supply in the heart of Lujiazui is about 917,000 square metres, Savills said.



Li firms in 1.7b yuan venture in Lujiazui