Sandy Ridge stands ready for its first data centre
The Hong Kong government is set to test developer appetites for digital infrastructure projects with the launch late last week of a tender for a data centre project across the border from Shenzhen which would require the winning bidder to build a facility measuring at least 150,000 square metres (1.6 million square feet) .
The government is positioning the land sale in the Sandy Ridge area across the river from Shenzhen’s Luohu district as a way to attract tech investment to its “Northern Metropolis” effort to promote development of areas of Hong Kong bordering the mainland.
“Through this tender, we hope to attract capable investors to develop Sandy Ridge into an advanced data facility cluster for a data centre and related industries to drive forward innovation and technology development in Hong Kong,” said a spokesperson for the Innovation, Technology and Industry Bureau.
Of the companies that have developed or invested in data centres in Hong Kong, Shanghai-based GDS Holdings may be the most likely bidder for the site, according to Jack Tong, director of research and consultancy at Savills Hong Kong.
“GDS Holdings has developed several smaller-scale (Hong Kong) data centres over the years (totaling between 100,000 to 200,000 square feet) and leased other data centres for operation. It would not be a surprise if they also bid for the Sandy Ridge site to further expand their data centre presence in Hong Kong,” Tong said.
Design Counts
With an eye to fostering growth of data and AI-related industries in Hong Kong, the government is offering Lot No. 953 in Demarcation District No. 89 at Sandy Ridge in a tender set to conclude at the end of December.
Hong Kong chief executive John Lee wants the Northern Metropolis to work (Image: John Lee campaign)
Other potential bidders for the Sand Ridge site include developers Goodman and Mapletree, as well as data centre operators such as China Mobile, China Telecom and SUNeVision, noted Savills’ Tong.
The winning bidder will be entitled to develop 150,000 to 250,000 square metres (1.6 million to 2.7 million square feet) of gross floor area with at least 70 percent of the total GFA to be allocated to high-tier data centre use. Another 25 percent can be for office use and the remaining 5 percent for ancillary space, according to the terms of the tender.
The site is located in a hilly rural area in the northeastern New Territories between the Man Kam To and Lo Wu control points, and if funds are available, the government said it plans to install water and utility infrastructure to support development of the data centre.
The tender will be evaluated using a two-envelope approach, with 70 percent weight given to technical proposals and 30 percent to price.
Hong Kong data centres have been in demand lately, with UK fund manager Actis said to be in late stage talks to acquire a portfolio of server sheds in the city from developer Grand Ming valued at around $676 million.
Not for Everyone
Despite the appeal of data centres in Hong Kong, the scale of the Northern Metropolis project could keep many potential bidders on the sidelines for this tender.
“Only big operators or developers would have the financial ability to participate in this tender, other than being one of the parties in a consortium,” Alex Leung, chief surveyor at CHFT Advisory and Appraisal, told Mingtiandi.
“We are concerned not only with the maximum GFA, but also the minimum GFA for this big plot,” he said, highlighting that the minimum GFA for data center use on this site is 1.13 million square feet.
Leung also noted that construction costs at this outlying site would be much higher than China Mobile’s data centre development in Sha Tin and ChinaChem’s mixed-commercial and data centre project in Tung Chung, which are both in more developed areas in the New Territories.
“Also, given the poor location and quiet environment, there is no alternative usage if the demand for the data center changes,” he added.
Given these challenges, and the complexity of the two-envelope tender process, Leung estimates that bids for the Sandy Ridge site will come in at under HK$1 billion.
That estimate is a fraction of the HK$5.6 billion which China Mobile paid to acquire a Sha Tin data centre site in 2020, with the mainland telco outbidding CK Asset, Sun Hung Kai Properties, Chinachem Group and several others for the right to develop up to 938,500 square feet of gross floor area on that plot.
In 2022, ChinaChem Group won its mixed-commercial and data centre site in Tung Chung for HK$2.78 billion, or the equivalent of HK$2,202 per square foot of developable area.
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