Henderson Land Development has made a car park in Central district Hong Kong’s most valuable commercial property, after the top local developer agreed to pay HK$23.3 billion ($3 billion) for the site at a government land auction which closed last Friday, according to a statement on Tuesday from the Hong Kong Lands Department.
The builder of such Hong Kong landmarks as the IFC, which it co-developed with SHK, plans to convert the 31,000 square foot (2,880 square metre) site near the Bank of China building and the Cheung Kong Centre into “a landmark building” according to a statement from Henderson vice chairman Martin Lee Ka-shing. The property is expected to primarily offer office space, with an additional retail component.
Henderson’s purchase of the first commercial site to go on sale in Central since 1996 not only set records as the biggest ticket property transactions in the city to date, but with the project on Murray Road approved for development of up to 465,000 square feet (43,199 square metres) by gross floor area, also sets a new high price of HK$50,064 per square foot.
Hong Kong Heavyweight Wins as Mainlanders Stay Away
Henderson won the rights to develop the site after besting a largely local crowd including Li Ka-shing’s Cheung Kong Property Holdings, Wharf Holdings, the Chan family’s Hang Lung Properties, Nan Fung Development, Joseph Lau’s Chinese Estates and Sun Hung Kai.
Mainland developer Shimao Property Holdings also bid on the parcel in a joint effort local Hong Kong player New World Development. Despite mainland companies dominating many of Hong Kong’s biggest land sales in recent years, Chongqing-based CC Land was the only mainland developer to make a solo bid for the Murray Road site.
In the results of another Hong Kong land auction announced yesterday, a joint venture between mainland developers KWG and Longfor Properties beat out 15 other entrants to win a residential site in Kai Tak with a bid of HK$7.23 billion.
Rising Office Rentals Help Bring Record Prices
The winning bid exceeded analyst expectations which had climbed steadily throughout the year. Brokers at international property consultancy Colliers International had estimated in January that the site would bring in $2.2 billion, with that figure having risen to $2.4 billion in a March prediction by Knight Frank. Henderson says that it plans to complete the new building by 2022.
Office rents in Hong Kong’s Central district are already the world’s highest, according to research by JLL. In a report released in December, the property consultancy found that grade A space in Central now rents for over 50 percent more than what tenants would pay for similar space in the priciest locations in London or New York.
Development Site Sells for More Than Leased Out Assets
The rising office rents and the scarcity of Central sites meant that Henderson paid more for the Murray Road site than even the most expensive en bloc and strata-title sales in the city to date.
In February of 2016, 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. That Wanchai deal was preceded by another acquisition in the same district in 2015, when Chinese developer China Evergrande Group set a record for en bloc acquisitions by purchasing the Mass Mutual Tower for HK$12.5 billion – paying approximately HK$36,200 per square foot for that office block.
The previous high price per square foot for an office transaction in the city was the HK$39,700 per square foot paid in March this year for strata-title space in 9 Queen’s Road Central, according to public records.