Hong Kong developers have once again been invited to submit bids for a commercial project in the city’s West Kowloon area which could be worth as much as HK$10.7 billion ($1.36 billion) upon completion.
The West Kowloon Cultural District Authority, a government office overseeing development of the 40 hectare, masterplanned project on the western lobe of the Kowloon peninsula, is giving the city’s builders another chance to make an offer for a site designated for three towers spanning 699,654 square feet (65,000 square metres) of office and retail space, according to tender documents.
The Artist Square Towers (AST) project, which was first put up for tender in November last year, could draw up to four bids reaching as high as HK$2.45 billion, said Vincent Cheung, managing director at Vincorn Consulting and Appraisal.
“The AST Project is one of the flagship commercial projects of the WKCD dedicated to creating a new Cultural Central Business District (Cultural CBD) in Hong Kong,” said the authority in an announcement. “It will provide the private sector with a precious opportunity to take part in such an ambitious arts-and-culture-led development.”
Art Market in Doubt
The tender, which is set to close on 14 November, marks a second attempt by the WKCD Authority to market the Artist Square Towers amid Hong Kong’s property market downturn, having made the same project available last November. That tender was cancelled earlier this year without a successful bid, likely due to developers having submitted bids lower than the reserve price, said analysts who spoke with Mingtiandi.
Upon its completion, the Artist Square Towers project will be linked directly to the MTR Corporation-developed Elements shopping mall in Kowloon, said Hannah Jeong, head of valuation and advisory services at Colliers Hong Kong. The entire project would cover around 672,044 square feet (62,435 square metres) of office space, with another 26,909 square feet (2,500 square metres) reserved for retail.
The site, located adjacent to the Kowloon station, is in an area of the district known as Artist Square, close to arts and cultural facilities, including M+, Asia’s first museum of contemporary, global visual culture, and the Hong Kong Palace Museum. It is also less than a 1-kilometre (0.62 mile) walk to the 11-hectare Art Park in front of Victoria Harbour.
The winning bidder for the site will hold 47-year rights to develop and operate the site under a build-operate-transfer (BOT) model, which means it would have to transfer ownership of the project back to the government once the lease expires.
Developers may perceive the project’s lease term, which is shorter than market standards, as well as its BOT leasehold structure, which eliminates the opportunity for capital appreciation, as limiting the project’s appeal, Jeong said.
Monthly rents for office space in the AST are expected to fall within the HK$50 to HK$70 per square foot range, said Jeong, who noted that, given the limited retail portion of the project, most of the shop space could be expected to provide amenities for the towers’ office tenants. Rents for retail space in the project could run from HK$100 to HK$150 per square foot, she added.
Considering the ongoing decline in Hong Kong office rents, and a pipeline of more than 11 million square feet of office space set to be added to the city’s grade A market over the next decade, developers may be cautious in bidding for the AST project, according to Cheung.
West Side Story
Should the Cultural Authority succeed in finding a buyer for the AST project, it could provide from years of frustration with the cultural-commercial hybrid community, with the authority having run a HK$491 million deficit in 2020 as its projects struggled.
Before the earlier attempt to sell the AST site ended without a buyer in February of this year, the Cultural Authority’s 2020 attempt to sell the site for its harbourside Arts, Commerce and Exhibitions (ACE) project also ended without an offer being accepted in August 2020.
Duncan Pescod, the former chief executive of the authority was pushed out in September 2020, eight months before the end of his term.