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Aerial view of the Kai Tak Cruise Terminal and Kwun Tong Typhoon Shelter on 29 September 2018 at Kai Tak, which used to be Hong Kong’s international airport. Photo: Roy Issa

First mix-use land plot at former Kai Tak airport runway draws positive response from developers

  • Nine bids were received when the call for tender closed on Friday, within the range that Knight Frank was expecting
  • The harbourfront parcel can be developed into a hotel with between 450 and 600 rooms, as well as an office complex

Hong Kong’s government received a positive response in its sale of the first commercial land plot on the former Kai Tak Airport’s runway.

Nine bids were received when the call for tender closed on Friday, from Sun Hung Kai Properties, CK Asset Holdings, Great Eagle Holdings, K&K Property, Sino Land, K Wah International and the Far East Consortium, according to agents and valuers familiar with the submissions. Two other unidentified developers also submitted bids.

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.

Still, “the area is under development, and lacks the complete set of amenities” needed by office tenants and hotel guests, said Alvin Lam, director of Midland Surveyors, who valued the land parcel at HK$9 billion, or HK$15,000 per square foot. “Commercial plots and hotels cannot be resold separately, so there is a risk, which is reflected in the pricing.”

Three subway stations – Kai Tak, To Kwan Wan and Ma Tau Wai – potentially serve the area, although their commencement, originally scheduled for the middle of 2019, is under question amid a construction scandal in the Sha Tin-to-Central rail link.

Commercial property prices are going through a correction in Hong Kong, as many offices that do not require client-facing premises relocate from Central – where some of the world’s most expensive commercial offices are located – to outlying suburbs like Quarry Bay. The city has more than 200 hotels with 72,000 rooms between them, according to data by the local tourism board.

The Kai Tak plot, measuring 102,043 square feet, can be developed into a hotel with between 450 and 600 rooms, and an office complex with 612,256 sq ft in gross floor area, according to Midland Surveyors.

“The scale of development is large,” so the plot is more suitable for “long-term investors, such as major developers with financial strength,” said Knight Frank’s executive director Thomas Lam, who had expected as many as 10 bids for the plot.

“But there is not enough amenity for transport,” Lam said, after raising his valuation for today’s plot by 3.6 per cent to between HK$8.9 billion and HK$9.5 billion, or between HK$14,500 and HK$15,500 per square foot.

Developers appear to still favour investments in residential real estate, underscoring CLSA’s prediction this week that the correction in home prices is over, and that prices may advance by 15 per cent by December.
This week, Sun Hung Kai agreed to pay HK$11.26 billion, or HK$17,360 per sq ft, for a piece of harbourfront residential land at Kai Tak, on which it plans to build luxury apartments with view of Victoria Harbour.

“Commercial real estate markets across Asia-Pacific will remain stable but their strength will be tested by unpredictable monetary policy and financial market volatility,” said Martin Samworth, group president and chief executive of advisory services at Asia-Pacific, Europe, Middle East and Africa at CBRE. “We expect a greater degree of scrutiny from investors when making decisions.”

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