Hong Kong’s Kowloon East business district has just received another shot in the arm, with Laws Group scooping up an ageing industrial building in the rising commercial area for HK$1.39 billion ($178.1 million). The family-owned conglomerate says it plans to redevelop the Kwun Tong property into a landmark commercial complex.
Laws Group bought the Maxwell Industrial Building at 350 Kwun Tong Road by public tender from the chairman of Maxwell Electronics Group, Yu Chung Kwong, according to a report in the Hong Kong Economic Times. The building sits on a 19,180 square foot (1,782 square metre) site which the group hopes to redevelop into a commercial property spanning up to 230,160 square feet (21,383 square metres) of buildable area.
Laws Group, which has interests in textile making, retail and property, paid the equivalent of HK$6,039 ($774) per square foot of buildable area for the site adjacent to Kwun Tong’s Ngau Tau Kok MTR station. The group is looking to replicate the model of its D2 Place project in West Kowloon – a former industrial building that was redeveloped into a hip shopping mall and office venue.
Kwun Tong Warehouse Appreciates 43-Fold Since 1983
Completed in 1967, Maxwell Industrial Building was purchased by the Maxwell Electronics Group for its own use in 1983 for HK$31.25 million. The current HK$1.36 billion book value of the property, which is now mainly used for warehousing, represents a 43-fold appreciation.
That jump in value for the industrial site comes before the building’s new owners gain approval for converting the property for commercial use. The price of HK$6,039 per square foot is less than half of the HK$14,000 per square foot of gross leasable area which Phoenix Property Investors received for their completed Kwun Tong View project at 410 Kwun Tong Road in May this year. Last week, Hong Kong’s Rykadan Capital paid HK$13,800 per square foot for an industrial project in Hong Kong’s Wong Chuk Hang area which had already been approved for commercial use.
The discounted price for this latest acquisition reflects expectations that Laws Group will need to pay a substantial government land premium before converting the property.
According to real estate consultancy Savills, which brokered the sale, the site can be redeveloped into a property around 100 metres tall. The waterfront neighbourhood is home to a number of new and upcoming grade A buildings, including the 20-storey Mapletree Bay Point across the street, which is slated for completion this quarter, as well as Manulife Tower and the twin office tower developments One Bay East and 77 Hoi Bun Road.
Once an industrial centre, the Hong Kong government is pushing to revitalise Kowloon East into a new commercial hub. Property firm Colliers expects 4 million square feet of grade A office supply to come online in the area over the next five years, according to a February report.
By 2020 Kowloon East is projected to host over 15 million square feet (1.4 million square metres) of grade A office space by 2020, the city’s second-largest inventory after Central.
Laws Group Extends Redevelopment Drive to East Kowloon
Founded as a textile manufacturer by Law Ting-pong in 1975, Laws Group has since branched out into fashion retail, as well as property investment and development. The group’s property portfolio includes a number of commercial buildings in Hong Kong as well as the 67th floor of the Shanghai World Financial Centre.
The company’s latest acquisition reflects CEO Bosco Law’s enthusiasm for turning old industrial properties into trendy commercial spaces. Laws Group created the D2 Place office and retail complex in Lai Chi Kok by redeveloping a family-owned industrial building in West Kowloon.
D2 Place One was launched in 2013 as a fashion-focussed shopping mall with 20,000 square feet of event space and a rooftop garden. The companion building, D2 Place Two, opened its doors this year with office and retail accommodation.