CK Asset Holdings confirmed today that it will redevelop its Hutchison House office building in Hong Kong as the city’s rising real estate values spur the developer to look for greater returns from the prime location in Central district.
“The redevelopment will culminate in a Grade A premises featuring technologically advanced facilities, as well as an increased number of parking spaces,” CK Asset executive director Raymond Chow was quoted as saying in the South China Morning Post on Monday. “Hutchison House’s redevelopment is poised to increase the valuation of the property, generate higher rental revenue and meaningfully enhance shareholder value for CK Asset.”
The redevelopment of the 44-year-old office tower could quadruple the value of the property to an estimated HK$31.8 billion ($4 billion), once the developer headed by Victor Li has replaced the current 22-storey building with a new 41-floor project, as approved by city authorities in 2012.
Developer Could Charge Double Rents for New Tower
Now that CK Asset has decided to go ahead with tearing down one of the biggest assets in its portfolio, the company will be expecting big returns on its investment.
The redeveloped property will be worth HK$60,000 to HK$65,000 per square foot, or HK$32 billion, upon completion, Thomas Lam, Senior Director at property brokerage Knight Frank told Mingtiandi in June.
The new project will provide a gross floor area of more than 490,000 square feet (45,400 square metres), according to a statement by CK Asset, down slightly from the 500,000 square feet in the current building. However, Lam estimates that the developer would be able to charge around HK$150 for tenants in the new tower – double the current HK$65 per square foot that it is able to charge for the 1974-vintage building that currently occupies the site.
In late June Victor Li, who is the son of Hong Kong super-investor Li Ka-shing, denied reports that he was planning to redevelop the property. Now the developer expects the new project to be completed in 2023.
Rising Values Raise Opportunities for Redevelopment
After CK’s competitor, Henderson Land Development, paid HK$23.3 billion last year for Central’s Murray Road Car Park, which sits adjacent to Hutchison House, the urge to squeeze more value from the prime location may have been too much to bear.
At the HK$65,000 per square foot cited by Knight Frank’s Lam, the new building would be valued at HK$31.8 billion – a more than four-fold increase over the value given for Hutchison House when Cheung Kong Property Holdings (as CK was formerly known) released a circulator citing the project in 2015.
Located at 10 Harcourt Road in Central, Hutchison House is the shore of Victoria Harbour and city hall, as well as being neighbours with such landmark properties as the Bank of America Tower, Bank of China Tower, and Cheung Kong Center.
Work on the new project could kick off soon with CK Asset having given tenants six month’s notice to vacate the premises at the start of June.