Victor Li to push ahead with Hutchison House redevelopment into 41-storey office tower starting next year
CK Asset Holdings will redevelop the 23-storey Hutchison House office tower in Central into a 41-storey office tower from next year, reflecting the conglomerate’s strategy to create extra value amid soaring land prices in the city’s landmark business district.
The announcement on Monday confirmed the South China Morning Post’s previous report on June 7, which revealed the first major project undertaken by Victor Li Tzar-kuoi since taking over as chairman of the Hong Kong conglomerate CK Hutchison from his father Li Ka-shing, who retired in May.
The property conglomerate has given tenants in the 44-year-old building six months’ notice to vacate the premises.
“The new commercial building will have a gross floor area of more than 490,000 square feet. It will stand about 41-storeys high with 185 parking spaces. Completion of the project is estimated to take place in 2023,” CK Hutchison said in a statement Monday.
Raymond Chow, executive director of CK Asset Holdings, said there has always been a shortage of commercial property in Central, and the rental demand for Hutchison House has always been high.
“The redevelopment will culminate in a Grade A premises featuring technologically advanced facilities, as well as an increased number of parking spaces. Hutchison House’s redevelopment is poised to increase the valuation of the property, generate higher rental revenue and meaningfully enhance shareholder value for CK Asset,” Chow said.
The redevelopment plan comes three days ahead of interim results from CK Hutchison and CK Asset on Thursday, reflecting the first such meeting since 53-year-old Li took the helm.
The building is adjacent to the world’s most expensive commercial plot, a former car park in Murray Road that was sold to CK Hutchinson’s rival Henderson Land Development for a record HK$23.28 billion (US$2.97 billion), or HK$50,064 per square foot, in May 2017.
That sale has driven up valuations of buildings in the area, which is Hong Kong’s main business district.
Thomas Lam, a senior director at Knight Frank said the vacancy rate in Central has fallen to just 1.5 per cent.
“It is good timing to redevelop the building,” he said.
He expects office rents at the redeveloped site will fetch HK$160 per sq ft per month, or HK$70,000 per sq ft when if made available for sale.
Recent monthly rentals in the building were asking HK$70 to HK$80 per sq ft.
Lam estimated the total investment costs for the redevelopment would be in the range of HK$5.5 billion to HK$6.5 billion,
The redevelopment site could lift the value to HK$35 billion, Lam said. Hutchison House was valued at just HK$7.7 billion in a circular released when the CK group underwent its largest reorganisation in 2015.
The gross floor area of the redeveloped site will remain unchanged, although it will take the shape of a taller building to command better sea views.
Henderson Land has said it planned to develop the Murray Road site into a 31-storey office and commercial building, scheduled for completion in 2022, at a total investment of HK$26 billion inclusive of land acquisition cost.
“Part of the views from the future office building to be built on the Murray Road site would be blocked by [the new] Hutchison House,” said Vincent Cheung Kiu-cho, deputy managing director for Asia valuation and advisory services at Colliers International.