HK Begins Tender For Trophy Central Harbourfront Site
HONG KONG – Despite the bleak commercial property sector that has subdued the expectations for the sale of the plum site, authorities in the territory have officially commenced marketing a trophy land parcel in Central district’s waterfront area, reported Mingtiandi on Sunday (20 December).
On Friday, Hong Kong’s Lands Department stated that it has started the open tender of the New Central Harbourfront’s Site 3, a 47,967 sq m (516,312 sq ft) land parcel stretching from Jardine House to the Star Ferry Central Pier.
“Our vision is for Site 3 to become a new landmark for Hong Kong, setting a benchmark for people-centric design with emphases on sustainable and urban design considerations as well as integration with the surroundings,” said a representative from the territory’s Development Bureau.
The representative said the authorities hope that the development will optimise space by constructing the maximum possible commercial floor space to cater to the robust demand for prime Grade A office space in Hong Kong, while creating a world-class harbourfront with pedestrian-oriented connectivity and quality public space.
Apart from building up to 150,000 sq m (1.6 million sq ft) of space, the winning bidder will need to provide at least 269,000 sq ft of public space, a landscaped deck covering two streets that are within the site, and a multi-level pedestrian link connecting the harbourfront with the Central district.
The tender’s terms indicate that the project will include up to 500,000 sq ft of office space, retail outlets, and public areas. However, the site is subject to strict building height limits – 16m on the eastern side and 50m in the western portion.
“Fronting the Victoria Harbour and located at the core area of Hong Kong, the Central commercial site is attractive and appealing to developers,” commented JLL’s Senior Director of valuation advisory services for Hong Kong Dorothy Chow.
“However, the city’s office and retail markets are currently in downturn as a result of uncertainties due to the COVID-19 outbreak, and developers [are expected to] be conservative in their bidding.”
The government started marketing the trophy land even though prime office rents in the Central district have slumped by 22.7 percent based on figures from JLL, which expects rents to decline by an additional 5 to 10 percent next year.
The move also comes even though the Lands Department had withdrawn the sale of a commercial plot within the former Kai Tak airstrip in May as all bids received were lower than the tender minimum.
Originally, Site 3 was supposed to be launched for sale in Q3 2020. But the authorities rescheduled the tender as it required more time to prepare the 2-envelope bidding process. Under this, the bids will be evaluated based on the amount offered and design merits of the proposed project, as the new development on the plum site is expected to establish a new social hub along the shore of Victoria Harbour that will influence people’s perception of Hong Kong.
When the Lands Department confirmed in late September that it will launch the tender for Site 3 before the end of 2020, Knight Frank’s Head of valuation and advisory Thomas Lam estimated that the site was valued from HK$37 billion (US$4.8 billion) to HK$40 billion ($5.1 billion). This translates to roughly HK$23,000 to HK$25,000 psf based on its potential gross floor area of 1.6 million sq ft.
However, those figures are about 25 percent lower than estimates made during the start of the year, while overall investments to develop the site could range between HK$60 billion and HK$65 billion.
As the sales process will end on 18 June 2021, JLL’s Chow believes that the tender’s duration as well as the huge capital needed could influence bids.
“…possession of the site will be in phases and the development completion period is long. As such, the tender process would take considerable time and developers would need to wait five months for the result after tender close,” added the veteran valuer.
