Mapletree Said to Put HK$9B Kowloon East Office Tower on the Market

Singapore private equity firm Mapletree Investments is said to be putting a HK$9 billion ($1.15 billion) office tower in Kowloon East on the market as Hong Kong’s world-leading office rents continue to provide profit opportunities for institutional investors.

The Temasek Holdings-backed property firm is reportedly looking for buyers for the 19-storey Mapletree Baypoint building in the Kwun Tong area, according to a Hong Kong Economic Times account. Completed last year, the grade A project houses tenants including WeWork and HSBC and has a gross floor area of 660,301 square feet (61,344 square metres), including 568,517 square feet of net lettable area.

The LEED Gold pre-certified property is said to be valued at HK$9 billion, which translates to approximately HK$13,630 per square foot.

Mapletree Investments purchased the plot Kwun Tong Inland Lot No. 761 for $3.8 billion in 2014 for what was the Singapore company’s first office project in Hong Kong. The sale requirement of the site specified that the developer could not sell the building on a strata-title basis.

Mapletree Investments did not respond to Mingtiandi’s enquiries by the time of publication.

New Landlord For HSBC, WeWork

The property’s pre-leasing started last year and the Kowloon East building is ready for tenants to move in after being granted its occupation permit in April. Last week, HSBC reportedly leased two floors totalling around 70,000 square feet in Mapletree Bay Point for HK$35 per square foot, and about 60 percent of the building has already been leased.

American apparel company VF Corporation also took up three floors spanning 10,500 square feet for a reported HK$25 per square foot in January. The leasing deal came after US co-working giant WeWork signed up for a 36,000 square foot floor at a rent of HK$25 per square foot in August last year.

Leasing momentum for the property could slow in the coming months as its large footprint design limits the number of potential full-floor tenants, according to a market source who spoke with Mingtiandi. “The relatively large floor plates of some 36,000 square feet can only attract multinational companies as small and medium-sized enterprises do not need space that big. However, multinational firms typically prefer relocating to areas like Taikoo and Quarry Bay on the Hong Kong Island when looking for offices.”

The valuation for the property is some 10 percent lower than the price fetched by Wheelock’s nearby 8 Bay East office property sold for last October. Located at 348 Kwun Tong Road, the building is a five-minute walk from the Ngau Tau Kok MTR station.

The location of the building close to the Ngau Tau Kok MTR station may also be less appealing than points near the neighbouring Kwun Tong or Kowloon Bay stops, where shopping malls and restaurants are concentrated, said the source.

Rising Office Supply in Kowloon East

The abundant supply of new office space in Kowloon East may also give tenants the advantage in this section of town.

A number of new office towers in Kowloon East have been welcoming tenants since the fourth quarter in 2017, including Sun Hung Kai Properties’ Two Harbour Square, the Kingston Financial Centre owned by Kingston Financial Group and Hong Kong Pacific Tower developed by Hong Kong Pacific Investments.

Kowloon East will continue to be Hong Kong’s biggest source of office space in the future by supplying 1.4 million square feet of new places to park desks next year, accounting for 64 percent of the fresh supply citywide.

Nonetheless, brokers are confident that the rising supply will be smoothly absorbed by demand from co-working operators, expanding and consolidating multinational firms and tenants from nearby Industrial office buildings, according to Adrian Tang, head of Kowloon markets at JLL.

The seller of the Mapletree Baypoint, Mapletree Investments, owns and manages S$46.3 billion ($34.6 billion) of properties including office, retail, logistics and residential properties. It manages four REITs listed in Singapore and six private real estate funds, which hold a diverse portfolio of assets in Asia Pacific, the UK and the US. It has offices across the globe including Singapore, Australia, mainland China, Hong Kong, India, Japan, the UK and the US.