Hong Kong’s new business hub at Kai Tak may fall years late as developers turn skittish
- Government may postpone planned land sales, analysts say
- Knight Frank has lowered its estimate on the value of remaining Kai Tak parcels by 5 per cent to a range of HK$87 billion to HK$98 billion
The bold vision to transform the former Kai Tak airport site into a second major business hub in Kowloon East may have to be put on hold for a while, as confidence in the project has been dealt a blow after a local developer judged it too risky to proceed with the purchase of a HK$11.1 billion (US$1.42 billion) site, according to industry experts.
The government may opt to defer the sale of some commercial sites at the city’s former airport by up to two years until sentiment improves, a delay that would have a domino effect upon the completion cycle for some commercial buildings.
“If the government really is not sure about next year and they defer more, there is a potential they change [the sales schedule], especially on the runway side,” said Hannah Jeong, head of valuation and advisory at Colliers International.
On June 11, Goldin Financial Holdings rescinded its bid for 4C Site 4, forfeiting its HK$25 million deposit, citing “social contradiction and economic instability”.
The failed land sale, along with slower-than-expected development of an underground subway line linking the Kai Tak area, along with planning delays for a monorail system, were seen as dragging down interest for the remaining commercial sites.
In the 2011-12 Policy Address, the Hong Kong government revealed a plan to transform an area that comprises Kai Tak, as well as part of Kowloon Bay and Kwun Tong into the city’s second core business district.
In March, the government said it planned to sell five commercial parcels at Kai Tak, comprising 5.53 million square feet of gross floor area during the coming year.
On Friday, the government said only one site forfeited by Goldin Financial would go up for tender during July to September. The site was won by Goldin during a tender in May, although the parcel was originally scheduled for sale in the prior financial year.
If the government sticks to its land tender schedule, the five parcels scheduled for the 2019 financial year would be offered in the six-month period from October.
However, some analysts expressed doubt the government would stick to the land sale schedule.
“I predict some parcels may be rolled over to the next financial year,” said Thomas Lam, executive director and head of valuation and advisory at Knight Frank.
Knight Frank lowered its estimate on the remaining Kai Tak parcels by 5 per cent to HK$87 billion to HK$98 billion (US$11.14 billion to US$12.55 million), revising down figures from the beginning of the year.
Only two out of 12 commercial parcels at Kai Tak have been sold. On January 30, a commercial plot on Kai Tak runway was withdrawn from sale as the government rejected all nine bids. The site later became one of the five parcels the government said it would offer for tender this financial year.
“The government will not be fast when selling land under a string of uncertainties. Developers will not be aggressive when offering prices.”
Secretary for Development Michael Wong said at a press conference on Friday that the remaining land parcels would be offered in a “consistent” schedule.
Other analysts said the delays could push the completion of the Kai Tak area back by a decade.
“I don’t believe it can be [realised] so soon because the overall development is lagging” said Leo Cheung, corporate development director of valuations and property management at Pruden Group. “[The central business district plan at Kai Tak] will be delayed [by up to 10 years] to 2040, or at least 2035.”
“Among the entire Kai Tak area, transport is the incurable disease,” Cheung said. “It is in no position to become the second central business district if the transport cannot be fixed.”
“I think it will be a miracle if it can be completed by 2030,” said Cheung.
The monorail will be an elevated railway connecting Kowloon Bay to the runway precinct, cruise terminal and Kwun Tong, in a network of 12 stations.
Construction for the monorail was expected to get underway last year, but so far only the first stage of a feasibility study has been completed, with the interim public consultation still in progress, according to project’s official website.
“Without the monorail completed, it is difficult to promote the sites on the runway,” said Fiona Ngan, head of office services at Colliers. “We are more optimistic on the city centre and sports park parts of Kai Tak.”
Ngan also expressed doubt on the progress of the Sha Tin-Central Link, Hong Kong’s costliest rail project, which is being constructed simultaneously in two separate parts. The opening of the Hung Hom to Admiralty section of the line, originally slated for December 2020, has been delayed to 2021.
“Now it is said it will open by 2021,” Ngan said. “But when will the Hung Hom part be fine?”