Office rental

Causeway Bay landlords mull upgrades as rents tipped to increase

Improved infrastructure linking Central and non-core districts set to push up office rents

PUBLISHED : Wednesday, 22 April, 2015, 12:17am
UPDATED : Thursday, 23 April, 2015, 12:03pm

Landlords in Causeway Bay are either accelerating or pondering redeveloping their old properties as improved infrastructure linking Central and non-core districts would spur office rents higher over the next 10 years, according to industry experts.

Colliers International executive director Simon Lo Wing-fai said office rents in Causeway Bay would benefit once the Central-Wan Chai bypass and Island East Corridor Link due to be completed in 2017 are finished.

"The rental gap between Central and Wan Chai or Causeway Bay will be narrowed," he said.

In its latest report, Colliers said the rental premium of Central over Wan Chai and Causeway Bay would narrow from 46 per cent last year to 23 per cent in 2025, driven by improved infrastructure.

In 2025, Grade-A office monthly rents in Wan Chai and Causeway Bay would increase 118 per cent to HK$136.90 per square foot from HK$62.90 per square foot last year, it said. Central Grade-A office rents would jump 83.5 per cent to HK$168.10 per square foot in 2025, from HK$91.60 per square foot last year.

Colliers' forecast came after news that The Excelsior hotel may be torn down to make way for a commercial development after 42 years as a Causeway Bay landmark.

Excelsior Hotel (BVI), a wholly owned subsidiary of luxury hotel operator Mandarin Oriental International, has secured approval to build a 26-storey commercial building over the four-storey basement at 281 Gloucester Road, according to the Building Department's February digest released last Friday. The plan would yield a total gross floor area of 684,005 square feet.

Lo said the site would be a desirable location for Grade-A office with retail shops at street level. "It is an excellent location for office development with a spectacular sea view," he said.

Other plans under way for redevelopment include Hysan Development, which has demolished Sunning Plaza and Sunning Court in Causeway Bay to build a mixed-use office and retail complex on the site. Hysan said earlier that the redevelopment of Sunning Plaza and Sunning Court was mainly to cater to the creation of offices for tenants who were moving out of Central and to make sure there was enough space to deal with future demand.

Another property consultant, who requested not to be named, said a "Ginza-style" commercial project would increase the commercial value of the site occupied by The Excelsior.

"Rents will definitely be higher as there is strong demand for high-end restaurants in Hong Kong," he said, adding that the estimated construction cost could be HK$3 billion.