Hong Kong’s Cheung Sha Wan market may get a little hotter next month when a newly renovated office building is set to be auctioned off in the active West Kowloon area. The 23-storey PeakCastle tower will be offered by public tender on June 22, with a tentative asking price of HK$1.72 billion ($221.99 million).
Should the auction bring in the seller’s asking price, it would value the asset at HK$11,830 per square foot, over 40 percent more per square foot than the current owner paid for the building in 2015, but well below the rate of recent sales of individual floors in the neighborhood.
The seller of the newly repositioned asset at 476 Castle Peak Road is a subsidiary of Hong Kong-listed developer Hanison, which is known for its redevelopment projects. The affiliate of developer HKRI had acquired the building in September 2015 for HK$998 million via a joint venture with HKRI, according to an announcement to the Hong Kong exchange at the time. The building was renamed PeakCastle as part of the repositioning effort.
Rare En Bloc Asset in an Up-and-Coming Neighborhood
The tower is one of a relatively small number of buildings in the Cheung Sha Wan area that has an en-bloc as opposed to strata-titled ownership structure. Located near the Lai Chi Kok station on the MTR’s Tsuen Wan Line, PeakCastle has 13,508 square metres (145,394 square feet) of office space. Its prime location abutting three streets – Castle Peak Road, Tsap Fai Street, and Wing Hong Street – and surrounded by a variety of office, retail, and residential projects is a key selling point.
Originally built in 1984, and previously renovated in 2000, the latest remodeling of PeakCastle is expected to be completed by the end of the month. Renderings reveal a modernist design for the main entrance, elevator lobby and office floors. The property also has a retail component on the ground floor.
According to Danny Chan, Regional Director of Capital Markets at JLL, whose company has been retained as sole agent to conduct the auction on June 22nd, the building is currently 82 percent occupied, with a mix of trading, textile, and information technology tenants. JLL expects the property will see a steady increase in office rental income over the next three years, driven in part by demand for office space in the area as well as by development of new transportation infrastructure. Average rental rates in the building are said to be HK$30 per square foot per month, according to local media reports.
Local Developers Are Eyeing Cheung Sha Wan
Demand for office and industrial property in Cheung Sha Wan been heating up in recent years, according to JLL, with new buildings coming online to augment the area’s tight supply of office space. Among them are the soon-to-be-completed China Shipbuilding Tower at 650 Cheung Sha Wan Road, the top two floors of which were recently purchased by mainland conglomerate China Shipbuilding Industry Corporation (CSIC) for the record-setting price of around HK$19,000 ($2,440) per square foot.
Another office tower, The Agora at 55-57 Wing Hong Street, is scheduled for launch late next year. The 31-floor Global Gateway Tower, a Grade A office property at 63 Wing Hong Street developed by Henderson Land, was completed in 2015.
New World Development has invested HK$11.82 billion ($1.52) in Cheung Sha Wan since mid-February, picking up two commercial sites through government tender – in both cases bidding against a host of other Hong Kong developers.
According to data from JLL, the Kowloon West submarket, which includes Cheung Sha Wan and Lai Chi Kok, is expected to contribute about 150,503 square metres (1.62 million square feet) of new office space over the next five years, or 15.79 percent of Hong Kong’s future supply during that period. Kowloon East will see a greater amount of new office completions at 380,902 square metres (4.10 million square feet), followed by the Hong Kong East/South market with 245,264 square metres (2.64 million square feet).