The Hankow Apartments in Tsim Sha Tsui
New World Development has secured final approval for a 28-storey commercial-led project in the heart of Kowloon’s Tsim Sha Tsui district, with the builder’s redevelopment application receiving the green light from the Hong Kong Town Planning Board’s Metro Planning Committee.
In public records released Friday, the Metro Planning Committee conditionally approved New World’s proposal to transform the ageing Hankow Apartments into an office, retail, and residential tower, clearing the final regulatory hurdle before the project commences. Earlier this week, the Planning Department stated that it has “no objection” to the developer’s plans.
However, with Hong Kong’s residential and commercial property markets in a protracted slump, the property’s current market valuation is likely to have fallen from the value of HK$2.134 billion ($272 million) appraised value from July 2022 which was used in the application for the sale.
The market slide is expected to continue this year and will challenge the economics of the project, with residential prices plummeting nearly 21 percent in 2023 from their peak in September 2021, and grade-A office capital values declining over 10 percent in 2023 from the previous year, according to CBRE.
“The sustained decrease in homebuyer interest, compounded by financing pressure for developers under the high interest rate environment, has had a tangible effect on property development,” Cathie Chung, senior director of research at JLL in Hong Kong said in a January report. “This slowdown is noticeable at every stage of the residential development lifecycle, from land sales to the commencement of construction, and is anticipated to persist, given the dim home price outlook.”
New World had not responded to Mingtiandi inquiries by the time of publication.
Tough Market
Located near the Tsim Sha Tsui MTR station at 43-49A Hankow Road, New World gained full ownership of the Hankow Apartments through a March 2023 auction under Hong Kong’s compulsory sale for redevelopment program.
Adrian Cheng, chief executive of New World Development
The builder had reached the 80 percent threshold required to apply for a compulsory sale of the 65-year old building in 2019 and submitted its application to Hong Kong’s Lands Tribunal that same year, with approval coming in February 2023.
New World’s plan for the site includes 138,786 square feet (12,894 square metres) of gross floor area, with 110 residential units spanning the top 11 storeys separated from 10 storeys of office space in the mid-section of the project by an 18th floor clubhouse and communal space. The ground through seventh floors are earmarked for retail and office space.
However, with the Metro Planning Committee’s approval valid for four years, the company may opt to reconsider the project’s timing, as office and residential demand in Hong Kong is set to remain weak this year.
“Pursuant to the decision document, the building must be completed in six years (from the 17 March 2023 compulsory auction sale date), i.e. about five years from now. Also, (Metro Planning Committee permission) is usually valid for four years upon approval. There seems to be some time for them to decide on the actual redevelopment plan,” said Alex Leung, chief surveyor at consultancy CHFT Advisory and Appraisal.
According to CBRE, citywide office rents are projected to slide another 5 to 10 percent in 2024, while residential prices and transaction volume are expected to continue trending downwards for at least the first half of the year.
Tsim Sha Tsui In Focus
New World is one of several developers who have initiated new projects in Tsim Sha Tsui, as the harbourfront district has outperformed other Hong Kong commercial hubs during the property downturn. According to JLL, Tsim Sha Tsui was the only submarket that saw office rents hold steady in 2023, compared to a 6.4 percent decline in Central and a 5.3 percent dip citywide.
This week, competitor Henderson Land secured full ownership of Block B of Champagne Court, a 67-year old building located only a seven-minute walk from Hankow Apartments on Kimberley Road. The developer, which also acquired the building via compulsory sale auction, intends to redevelop the site into a 23-storey commercial building.
In March 2023, US developer Hines opened its first-ever rental apartment project in East Tsim Sha Tsui’s Prat Avenue. Operated by Hong Kong-based rental housing provider Dash Living, the 18-storey co-living facility Dash on Prat was redeveloped from the former Butterfly on Prat hotel which Hines had acquired in November 2021 through a joint venture with local investment firm Mindworks Ventures.
In May 2022, local redevelopment specialist Lofter Group teamed up with Canada’s BentallGreenOak and Schroders Capital to acquire a set of properties at 31-37 Hankow Road, right next door to Hankow Apartments, for HK$1.5 billion ($190 million). The partners intend to construct a 115,800 square foot (10,7589 square metre) commercial project on the site.
Tsim Sha Tsui’s retail market is also showing signs of improvement, with New World’s mall operator unit K11 Concepts announcing in a LinkedIn post this week that the K11 MUSEA mall at its Victoria Dockside waterfront development recorded a 40 percent year-on-year increase in footfall in the second half of 2023.
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