Bidders Expected to Line Up for $2.2B Hong Kong Car Park

The first sale of a plot of commercial land in Hong Kong’s central business district in more than 20 years is expected to stir up a bidding war that could bring offers of as much as HK$17 billion ($2.2 billion) for the site across Des Voeux Road from the Bank of China Tower and the Cheung Kong Center.

Currently used for a car park, market experts believe the location should make the 450,996 square foot (41,899 square metre) project along Murray Road irresistible to bidders in an already hot Hong Kong market.

“The Murray Road site is ideal in terms of its location and sheer size,” Antonio Wu, Colliers’ deputy managing director of capital markets and investment services for Asia, told Mingtiandi in an interview. “Every company vies for a presence in Central. There will be a bidding competition from mainland financial institutions, developers and state-owned enterprises as land supply in the area is very scarce.”

Mainlanders Expected to Bid High for Prime Central Site

Analysts said the site is also likely to attract keen interest from Hong Kong developers as it is the first commercial development site made available in Central since 1996. However, these local players may likely be outbid by mainland rivals eager for a foothold in the prime location.

Cashed up Chinese companies have driven a series of record purchases of Hong Kong office buildings over the last two years, with even up and coming locations commanding top prices. In July 2016, Wheelock & Co sold the east block of the One Harbourgate complex in Kowloon to Shenzhen-based Cheung Kei Group for HK$4.5 billion. That deal came after the developer had already sold the first half of that same complex in late 2015 to another mainland investor, China Life, for HK$5.86 billion.

In February of last year, mainland financial giant China Everbright agreed to purchase the Dah Sing Financial Centre in Wanchai district for HK$10 billion with plans to use the 348,000 square foot office tower for its Hong Kong headquarters. In 2015, Chinese developer China Evergrande Group made its own record breaking deal in Wanchai, buying the Mass Mutual Tower for HK$12.5 billion.

The Murray Road plot is one of six Hong Kong government sites for sale by tender before March 31 of this year. It’s expected to become the most valuable plot in Hong Kong’s land sale programme for the fiscal year ending on the last day of March.

Rising Rents Drive Demand for Hong Kong Office Assets

The demand for Hong Kong office assets is driven by rising rents that have already made Central the most expensive place in the world to lease an office.

Grade A office rental rates in Central rose by more than 13 percent in 2016, according to a report released last month by JLL. The agency’s figures show that the cost of an office in the city’s traditional downtown is now more than 50 percent higher than what tenants would pay for prime space in London or New York.

The trend towards costlier offices is expected to continue in 2017, with Colliers projecting office rents in Central to rise around 5 percent this year, with capital values predicted to rise another 10 percent.