asian cities report – 2h 2019 hong kong oﬃ ce · 2019-12-07 · asian cities report – 2h 2019...

Hong Kong Offi ceAsian Cities Report – 2H 2019

REPORT

Savills Research

savills.com.hk/research

Hong Kong Offi ce

The West Kowloon offi ce market is maturing rapidly

THE KOWLOON WEST OFFICE MARKETThe long-awaited tender for the commercial site above the West Kowloon Terminus was announced in late November, with Sun Hung Kai emerging as the winning bidder with a premium of HK$42.232 billion, beating off competition from Cheung Kong and a Henderson-led consortium. The site has a GFA of around 3.16 million sq ft, the majority of which is to be offi ces, meaning an AV of around HK$13,000 per sq ft. The winning bid was only at the lower end of market expectations, but the lump sum paid was still the highest among all government sites sold to-date, showing developers’ interest in this unique location. So far only one signifi cant commercial project, ICC, the tallest offi ce building in Hong Kong, has been erected in the area. The area itself has a curious identity and is sometimes regarded as an extension of Tsim Sha Tsui by some in terms of its location, while others regard it as an extension of Central in terms of its tenant profi le.

The more traditional Kowloon West offi ce cluster is in fact a few MTR stations away from this unique commercial hub, which spans over the Cheung Sha Wan, Sham Shui Po, Kwai Tsing and Tsuen Wan districts. Being one of the six business districts in Hong Kong, Kowloon West off ered 8.8 million sq ft net of Grade A offi ce space at the end of 2018, with average rents standing at HK$36.3 per sq ft net in Q3/2019, in terms of fl oor area and cost amongst the lowest of the six business districts.

Being a traditional industrial area, Kowloon West welcomed its fi rst Grade A offi ce development, Nan Fung Centre in Tsuen Wan, in 1983, coinciding with the gradual relocation of the city’s manufacturing base from Hong Kong to Guangdong Province after the opening up of the China economy in 1979. A few more Grade A offi ces were erected in the late 80s and early 90s in Cheung Sha Wan (Trade Square and Cheung Sha Wan Plaza being completed in 1989) as well as Kwai Chung (the two towers of Metroplaza were completed in 1991).

Nevertheless, the stratifi cation of many offi ce towers, as well as the loose scattering of Grade A offi ces in the area have made it diffi cult for the area to attract genuine industry clusters and multinational fi rms, resulting in a diversifi ed tenant mix and a relatively low-key profi le for Kowloon West as a business district.

The emergence of the area has taken place in stages with the completion of KCC in 2008 and 2012 (two towers) attracting market attention at the time with

TABLE 1: Particulars Of The West Kowloon Terminus Commercial Site

Source Savills Research & Consultancy

GRAPH 1: Grade A Offi ce Rental Diff erentials By District, Q3/2019

152.8

85.1 83.3

55.9 53.6

36.3 35.9

0

30

60

90

120

150

180CentralCentral

KowloonKowloonWestWest

Kowloon Kowloon EastEast

Island EastIsland East

Tsim Sha Tsim Sha TsuiTsui

CausewayCausewayBayBay

WanchaiWanchai

67.167.1

1.81.8

27.427.4

2.32.3

17.317.30.40.4

CORE DECENTRALISED

HK

$ P

ER

SQ

FT

NE

T E

FF

EC

TIV

E


ADDRESSThe junction of Lin Cheung Road and

Austin Road West, Kowloon

LOT NO. Kowloon Inland Lot No. 11262

SITE AREA 632,923 sq ft

USER

Non-residential (excluding residential, godown and petrol fi lling station but

including hotel)

MAXIMUM GFA 3,164,616 sq ft

PREMIUM HK$42,232,000,000

AV HK$13,345 per sq ft

WINNING BIDDER Sun Hung Kai Properties

MAP 1: Hong Kong’s Six Business Districts

Source Savills Research and Consultancy

KOWLOON WEST:

Cheung Sha Wan, Sham Shui Po,

Kwai Tsing, Tsuen Wan

Grade A Stock = 8.8m sfAverage Rent = HK$36.3 psf net

Vacancy Rate = 5.0%

TSIM SHA TSUI:


Vacancy Rate = 2.1%

KOWLOON EAST:

Kwun Tong, Kowloon Bay, Kai Tak


Vacancy Rate = 9.5%

CENTRAL:


Vacancy Rate = 3.5%

WANCHAI/CAUSEWAY BAY:


Vacancy Rate = 3.5%

ISLAND EAST:


Vacancy Rate = 1.0%

Total: 69.9m sf

Hong Kong Offi ce

its high building quality and high-profi le tenants including BOA-ML, HKMA and China Mobile. This was followed by the successful revitalization of D2 Place One and Two (opened in 2013 and 2016) which drew offi ce tenants’ attention back to Cheung Sha Wan, with recent completions, such as 909 Cheung Sha Wan Road (2007), Billion Plaza II (2014) and China Shipbuilding Tower (2018) all being stratifi ed.

Looking ahead, there are three new offi ce projects on the horizon, all being developed by New World to come to market sequentially from 2021 to 2023, providing an additional 1.4 million sq ft net of new Grade A offi ce space in the area. This would push offi ce stock of Kowloon West above the 10 million sq ft net mark, making it larger than Island East and Tsim Sha Tsui and on a par with Wan Chai / Causeway Bay in terms of market size. The fact that such a large amount of new offi ce space is being developed (and properly managed) by a single landlord may promote Cheung Sha Wan as a high-quality business node, likely to attract various industry clusters and multinational corporations to relocate to the area.

In terms of infrastructure, the completion of the Central Kowloon Route by 2025, which will connect Kowloon West and Kowloon East and is likely to reduce travel time between the two business districts to around fi ve minutes, should further enhance the profi le and attractiveness of Kowloon West, which is already well-served by MTR and road networks connecting to Central and Hong Kong’s international airport at Chek Lap Kok.

The area began its evolution in the 1980s and has developed piecemeal since. From the late 1990s,

improved transport links and a burgeoning service sector have propelled further development of the area.

MAP 2: Future Grade A Offi ce Supply In Cheung Sha Wan, 2021 to 2023


MAP 3: Central Kowloon Route

Source Highways Department, Savills Research & Consultancy

CHEUNG SHUN STREET PROJECT

Floor Plate: Approx. 23,660 sf (G)Total Area: Approx. 565,000 sf (G)

Developer: New World DevelopmentTarget Completion Year: 2021

Cheung Sha Wan

KING LAM STREET PROJECT

Site Area: 83,184 sfMax. GFA: Approx. 998,208 sf


WING HONG STREET PROJECT

Site Area: 30,920 sfMax. GFA: Approx. 371,040 sf


Kai Tak Interchange

Yau Ma TeiInterchange

EXPECTED

COMPLETION DATE2025

TOTAL LENGTH 4.7 km

DRIVING TIME

After opening

Before opening

5 minutes30 minutes

CBD2KOWLOON EAST

KOWLOON WEST

Savills Hong Kong23/F Two Exchange SquareCentralHong Kong+852 2842 4400

asian cities report – 2h 2019 hong kong oﬃ ce · 2019-12-07 · asian cities report – 2h 2019...

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