New World Development has won the right to develop a HK$20 billion ($2.5 billion) commercial complex adjacent to the Hong Kong International Airport that will be almost five times the size of the city’s IFC Mall.
The city’s Airport Authority awarded New World subsidiary Roxy the right to design, construct, finance and manage a commercial development on a 79,000 square metre (850,349 square foot) plot at Site A2 and Site A3 of Skycity, a Wednesday filing to the Hong Kong Stock Exchange shows.
Skycity is the Airport Authority’s 25-hectare entertainment and retail development located next to the main passenger terminals of the international air hub. The development on Chek Lap Kok island will also connect to the soon t0 be opened Hong Kong-Zhuhai-Macau bridge.
New World to Share Revenue with Airport Authority
Expected to be completed in two phases in 2023 and 2027, the project will comprise retail, dining and entertainment facilities, transport terminals and 2,800 car parking spaces. Office spaces may also be included, according to the statement. The site can yield up to 350,000 square metres (3.8 million square feet) of floor area, and is expected to become Hong Kong’s largest retail centre when completed.
New World will pay all the costs for the development, amounting to an estimated cost of around HK$20 billion, which will be funded by the company’s internal resources or additional external debt financing. After completion, the Airport Authority will lease the development to Roxy through September 2066.
The Hong Kong-listed builder will be entitled to operate and manage the development, and will pay either a guaranteed rent or a rent representing 20 percent of the project’s gross revenue, whichever is higher.
Thomas Lam, senior director at Knight Frank, estimated that the commercial project will bring a long-term rental yield of around 4.5 to 5.5 percent for New World. The monthly rent for the retail space is expected to be around HK$85 to HK$120 per square foot, he added in an exchange with Mingtiandi.
“Due to the large amount of investment and revenue-sharing arrangement with the Airport Authority, it would take a longer period of about 10-15 years for the developer to recoup its investment,” Lam noted.
Proximity to Infrastructure
The project is set to benefit from its location next to the airport, which serves over 70 million passengers each year, and from the soon-to-be-completed infrastructure linking Lantau Island to other parts of the region. “Following completion of the major infrastructure such as the Hong Kong-Zhuhai-Macao Bridge, Three Runway system and Tuen Mun to Chek Lap Kok Link, the transportation network within the region will be greatly improved,” New World said in the statement.
“The Commercial Development will become a popular destination for both local residents as well as visitors from Greater Bay Area, the rest of China and the world” and is expected to bring a strong recurring income to the company, the developer added.
Skycity is located adjacent to the passenger terminal buildings of the airport, covering approximately 25 hectares of land. The Airport Authority unveiled the plan for Skycity in 2016 to build a retail and entertainment development a short walk from the airport terminals. It would house retail complexes, entertainment facilities, restaurants, hotels, and office towers.
New World is currently developing another mega-project on the other side of Hong Kong. Located in East Tsim Sha Tsui, the $2.6 billion Victoria Dockside project is set to open next year, providing 3 million square feet of floor area including office space, a Rosewood Hotel, serviced apartments, and art spaces.