West Kowloon Commercial Project Draws Lone Bidder
HONG KONG – Artist Square Towers, a mixed-use commercial project in West Kowloon, attracted only a single bidder in the name of Sun Hung Kai Properties during the tender’s closing on Monday, reported Mingtiandi on Tuesday evening (15 November, SGT).
The 40ha commercial development will consist of three towers with a total area of 699,654 sq ft. Of this, 26,909 sq ft is for retail space, while the lion’s share or 672,044 sq ft is intended for office space. It will also be connected to the Elements shopping centre in Kowloon.
In spite of the the long-term potential of such commercial property overseen by the West Kowloon Cultural District Authority, the tender only drew 1 bidder amidst the uptick in interest rates and rise in construction costs, which have resulted in most property investors and developers halting their investments, said Colliers’ Head of valuation and advisory services in Hong Kong, Hannah Jeong.
“WKCD is a long-term leasehold project for which the winning bidder will purely rely on rental income and no capital investment appreciation,” she explained.
“The interest rate for commercial assets already exceeds 4 percent (project financing can even cost up to 6 percent), which means your rental yield is no longer attractive.”
Notably, the tender represents the Authority’s second attempt to market the site amid a real estate market downturn. The first attempt in November 2021 was cancelled after bidders submitted offers lower than the reserve price.
When the latest tender was announced in September, Vincorn Consulting and Appraisal’s Managing Director Vincent Cheung forecasted that the commercial development could attract a maximum of 4 bids reaching as high as HK$2.45 billion (US$310 million).
Tenders for Hong Kong commercial sites have been lacklustre this year, including Chinachem’s purchase of a Lantau Island project at a rate below most experts’ projections. With land sale revenues plunging, Deloitte estimates that the city government’s budget deficit for the fiscal year 2022 to 2023 could hit HK$170 billion.