The redevelopment trend in Hong Kong’s largest logistics hub continues to heat up as an unnamed investor bought a 53,000 square metre industrial facility at 2-16 Lam Tin Street in Kwai Chung district for HK$770 million ($98 million), according to an account in the Hong Kong Economic Times.
The purchase of the CS Logistics Centre in Kwai Chung comes less than two months after Hong Kong-based private equity firm PAG made a HK$600 million profit selling a data centre located about three kilometres to the south of the location of this latest transaction.
Logistics Site Has Redevelopment Potential
The new owners of the one-storey CS Logistics Centre are said to be intending to take advantage of the property’s redevelopment potential to convert the project into a data centre. The transaction was revealed last week by local real estate agency Midland ICI, which is said to have brokered the deal on behalf of the seller.
The 53,000 square foot is currently leased to third-party logistics provider CN Logistic as their head office in Hong Kong. However, the site is approved for construction at a plot ration of 9.5 allowing the new owner to expand the amount of floor space to 195,000 square feet without seeking new planning permission.
In its current form the facility cost its new owner the equivalent of HK$14,528 per square foot of built area, but should the property be redeveloped to its full potential, the cost would work out to HK$3,949 per square foot, or about 47 percent less than the HK$7,513 per square foot that PAG achieved in their disposal of the Cargo Consolidation Complex at 43 Container Port Road in Kwai Chung in June.
Kwai Chung Industrial Market Heats Up
The Kwai Chung data centre deals come as both local and international investors are upping their bets on industrial assets along the gritty streets of the Hong Kong shipping hub.
Tang Shing-bor, a veteran investor whose extensive retail holdings have earned him the nickname of Hong Kong’s shop king has advocated further purchases of workshops and warehouses in the city, noting in an interview with the SCMP earlier this year that industrial assets in remote locations are set to benefit from new infrastructure, including the Hong Kong-Zhuhai-Macau bridge and the expansion of the airport in particular.
Tang’s sentiment appears to be shared by a number of investors as the Kwai Chung market has seen at least four deals of HK$770 million or more since the beginning of the year.
Local developer The First Group got the deal rush going in January by kicking off sales of strata-title office units at its KB3 project in Kwai Chung at prices averaging HK$10,000 per square foot, and Hong Kong mainboard-listed Hanison Construction Holdings followed up on the trend in March by teaming up with an unnamed investor to purchase the Central Industrial Building at 57-61 Ta Chuen Ping Street in Kwai Chung for HK$720 million.
In June, Guangzhou-based China Aoyuan Property Group grabbed headlines with its HK$950 million purchase of a 12-storey industrial building near Castle Peak Road in the district.