Hong Kong developers switch to buying buildings outright as land costs soar
Aggressive mainland Chinese property firms are pushing up land prices, forcing local rivals to find alternative projects for investment, such as redeveloping existing buildings
Hong Kong property firms have shifted their attention to buying whole, completed buildings outright in the city’s central districts, as their aggressive and deep-pocketed mainland rivals bid up the price of land to sky-high levels.
Vincent Cheung Kiu-cho, deputy managing director for Asia valuations at property agency Colliers International, said the surge in land prices in the past two years has forced local developers to seek new ways to increase their holdings, for example by launching new projects within the shells of existing buildings.
“Most developers are cash-rich, so they are able to try different ways to maximise their profits,” Cheung said. “Mainland developers have been bidding aggressively in land sales, but local developers are more familiar with districts like Central, and are bolder in offering high prices for en bloc buildings,” Cheung said.
Property investment funds also have a growing appetite for complete buildings near Central, he added. For example, real estate investment firm Pamfleet bought Bonham Circus, formerly known as the EIB Centre, on Bonham Strand in Sheung Wan, just two kilometres from Central, the city’s central business district.
He said that another building that may pique the interest of local developers and funds is a 25-storey residential block at 222 Hollywood Road in Sheung Wan that went on the market on Monday through sole agent JLL.
The building currently hosts 48 serviced flats operated by Ovolo Hotels, with a total gross floor area of 27,456 sq ft. The asking price was HK$530 million (US$68 million), or HK$19,303 per sq ft.
The redevelopment of the Reclamation Street/Shantung Street site in Mong Kok, Hong Kong’s most crowded shopping and residential district, has attracted expressions of interest from over 11 local developers, the Urban Renewal Authority said last week.
Covering about 1,389 square metres, the project is slated to provide 187 residential units, and has a total residential gross floor area of about 10,424 square metres and a commercial gross floor area of 2,085 square metres.