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HSBC Holdings made a rare foray into the property market yesterday, winning a commercial site in Sha Tin's industrial district in a government tender.
The bank plans to build a new back office on the plot to augment its existing administrative centres around the city.
The Lands Department yesterday announced that the bank had outbid six other bidders for the site in On Yiu Street with an offer of HK$816 million, or HK$1,777 per square foot.
Currently, the company owns a data centre and office at HSBC Centre at Olympic MTR Station and a data centre in the Tseung Kwan O industrial district.
The result of the tender has surprised the market as HSBC rarely acquires development sites in the city. It is the first site the bank has bought since purchasing an industrial plot  in Tseung Kwan O for HK$50 million in 2005. The bank spent HK$2 billion to build its data centre there, one of  its  four major global computer hubs.  
In 1998, the bank bought a new office building from Sino Land for HK$4 billion or HK$4,377 per square foot. It became the current HSBC Centre. 
Property agents estimate that  the value of the building  has risen to HK$9.1 billion or HK$10,000 per square foot.
'Soaring office rentals in Hong Kong is one of the reasons that encouraged the bank to acquire the site,' said Andy Yuen,  a director of the offices department at property consultant DTZ.
According to the firm, rents of  grade A offices in Central have risen 23.8 per cent to HK$125 per square foot over the past three quarters, while rents in Kowloon East, a non-core business area, grew 31.6 per cent to HK$26 per square foot.  
Offices in Wan Chai and Island East increased 23.3 and 20.8 per cent, respectively.
HSBC has  'many offices all over Hong Kong. It will save costs if they are consolidated in the same place', Yuen said.
Despite the site being located in a non-core business area, it attracted Shanghai-based developer Shimao Property Holdings and major developers such as Sino Land and Kerry Properties. Sun Hung Kai Properties'  SUNeVision Holdings and two other anonymous companies also joined the bidding.
'The price is lower than my expectation of HK$2,000 per square foot,' said James Siu,  a director at property agency Savills. 
'An industrial site in Tsuen Wan was sold for about HK$1,500 per square foot recently. That does not include the land premium the buyer has to pay to the government for converting  it into a commercial site.'
HSBC's site is located at the junction of On Yiu Street, On Kwan Street and On Lai Street in Sha Tin's Shek Mun industrial district. 
The 91,849 sqft site can accommodate all kinds of commercial projects, excluding a hotel development. It could provide a total gross floor area of 459,246 sqft.
The Planning Department imposed a building height restriction of 115 metres or about 29 floors.  
Shares in HSBC dropped 0.86 per cent to close at HK$81.10 yesterday.
Growing assets
An office building that HSBC bought from Sino Land in 1998 for HK$4 billion has risen in value to: $9.1{-b}



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HSBC

HSBC wins Sha Tin site with bid of HK$816m