Kerry Picks Up 26% of Hong Kong Co-Working Hub for HK$500M

Kerry Properties, a Hong Kong-listed developer controlled by Shangri-La Hotels founder Robert Kuok, has acquired 26 percent of an industrial building in Hong Kong’s southern district for HK$499.7 million ($64 million), according to a local media report citing government filings.

Land Registry documents reveal that six floors of the building known as the Remex Centre, were purchased by a company that lists as one of its directors Ip Pui Chu, who manages Kerry Properties’ real estate portfolio in the Asian financial hub.

The 23-storey industrial building in Wong Chuk Hang, which is rapidly transforming from its industrial past to a commercial future, has been repositioned by a number of co-working operators to capitalise on the area’s growing popularity as an affordable office location.

Kerry Steps Up as the Market Goes Low

According to the Land Registry, the developer picked up the first, tenth, seventeenth, eighteenth, and twenty-second floors of the Remex Centre, as well as the eleventh storey refuge floor, the rooftop, and the ground floor lobby, along with 19 parking spaces.

The 1978-vintage property at 42 Wong Chuk Hang Road sits directly opposite a residential development site won by a joint venture between Kerry, Swire Properties and Sino Land just one week ago through a public tender by the MTR Corporation.

People familiar with the matter who spoke to Mingtiandi said that the developer secured a nearly 38 percent discount on the seller’s HK$800 million asking price for the industrial assets, as property investors retreat to the sidelines amid slowing activity by mainland buyers and following five consecutive months of protests.

The number of transactions of industrial real estate assets in Hong Kong fell to its third-lowest monthly total ever in September, according to a report released on Monday by local property agency Ricacorp. Only 110 deals were recorded during the month, with only the 1997 financial crisis and the 2003 SARS outbreak producing lower results, according to the brokerage report.

Yielding a combined leasable area of 53,800 square feet (4,998 square metres), the developer paid HK$9,288 per square foot for the portion of the building it acquired, with market sources indicating that CBRE advised on the deal.

Snapping Up a C0-Working Hub

Campfire currently operates 50,000 square feet of flexible office space across six floors of the building, none of which are included in the Kerry Properties acquisition. At least three other co-working operators – D Work, Workspace Asia, and Office Hub – are also renting out desks in the Remex Centre.

The Wong Chuk Hang area has been gaining traction as a commercial hub since the opening of the South Island MTR line in 2016. The Wong Chuk Hang station is two stops from Admiralty, with accounting giant KPMG reportedly signing up for 10 floors in Swire’s South Island Place project last year.

Just ten minutes walk from Swire’s Wong Chuk Hang project is Wheelock’s One Island South, a 722,000 square foot office tower which opened in 2011.

Buying Non-Income Earning Space

Although the space will yield rental income in the near term, the developer’s acquisition of non-income earning space such as be the lobby floor and refuge floor, may also indicate an interest in redeveloping the property.

Just across the road Kerry and its partners acquired the MTR site last week for an initial land premium of HK$6.76 billion. Upon its scheduled completion in 2024, that project will deliver 2.1 million square feet of high-end housing and 506,000 square feet of commercial space, as well as a further 1.8 million square feet of residential units in the longer term. Homes in the project are expected to sell for around HK$28,000 per square foot.

Kerry had also teamed up with Sino Land for one of the earlier Wong Chuk Hang sites while Swire launched its South Island Place project in the district last year.

Taking Advantage of a Buyers’ Market

Kerry Properties secured its 37.5 percent discount off the seller’s asking price at a time when industrial real estate volumes, which totalled HK$4.3 billion during the period from July through September, are down 14 percent compared to the same period last year, according to CBRE.

“The coming months may see some Chinese buyers offload assets, particularly strata-titled properties, to replenish liquidity for their main businesses,” the agency noted in the report published two weeks ago.

Kerry has also been buying aging space in Hong Kong’s western district, including scooping up all 28 flats in a residential property near the University of Hong Kong for HK$514M just over a month ago.