Developers are lukewarm on Kai Tak’s commercial plot as trade war impasse creates an anticlimax to a week of record home sales
- Commercial development of hotels, office towers and shopping centres are more capital intensive and require longer payback than building residential flats
- Zoning regulations on the latest commercial plot requires at least a third, and up to half, of the gross floor area to be set aside for a hotel of between 480 and 800 rooms
The second commercial property plot on the runway of Hong Kong’s former airport received fewer bidders when a government tender closed on Friday, as the absence of a resolution in the US-China trade war provided an anticlimax to a week of record-breaking sales in the city’s home market.
Area 4C Site 4 on the Kai Tak runway, valued at HK$11.2 billion (US$1.4 billion), or HK$13,000 per square foot for the 863,000 square feet (80,175 square metres) of gross floor area, received six bids, according to the Lands Department. A January tender for the first commercial plot was scrapped after the nine bids received failed to meet the government’s minimum price.
“Developers are choosing to be cautious, and adopt a wait-and-see approach, after the escalation of the trade war,” said Vincent Cheung, managing director of Vincorn Consulting and Appraisal, who expected at least seven to eight bids for the oceanfront plot. “The issues between the US and China will continue much longer than expected.”
Commercial development, whether for office towers, shopping centres, or hotels, are a lot more capital intensive than building apartments, another reason that gives developers reason for pause, Cheung said.
The oceanfront plot, located near the city’s cruise terminal, offers full view of Victoria Harbour, which separates Hong Kong Island from the Kowloon peninsula and will host a hotel up to 800 rooms, and some office blocks.