Hong Kong’s URA Rejigs $5B Project in Kowloon

Hong Kong’s Urban Renewal Authority is preparing for a HK$46 billion ($5.8 billion) mixed-use project in Kowloon, having submitted an application to the Town Planning Board late last month revising a development plan for a site in Kwun Tong.

The site, which spans a pair of plots known as Development Areas 4 and 5, is part of the URA’s Kwun Tong Town Centre project and could yield as much as 2.16 million square feet (201,220 square metres) of floor area upon completion.

Once the plan is granted approval, the project will be made available through a tender, with the winning developer given the chance to decide if it will keep the hotel portion of the project or replace it with other commercial facilities, according to the application document from the URA.

This flexible approach deviates from past practices where the URA mandated use of each area, said Ryan Ip, head of land and housing research at local think-tank Our Hong Kong Foundation. By giving developers room for adjustment, the URA is potentially broadening the appeal of the project and minimising the likelihood of a failed tender, Ip said.

Revised Plan

The URA was expected to open the tender for the project in March of this year, however, that plan was postponed to give the authority time to submit a revised plan to the Town Planning Board and win approval for the reconfigured project, said Alkan Au, senior director of valuation advisory at JLL in Hong Kong.

The URA introduced the concept of flexible planning parameters in January of this year as the fifth wave of the pandemic clouded the economic picture and made developers more cautious, Ip said, with the revised approach allowing Development Areas 4 and 5 to be used for commercial purposes, including hotels, offices and retail.

Under the original scheme, 15 percent of the floor area in Development Areas 4 and 5,  was designated for hotel development, which reduced the appeal of the project as tourist inflows having dried up during the pandemic.

With three commercial land sales in the Kai Tak area having been cancelled in 2019 and 2020 due to lower than expected developer interest, the URA had additional incentive to push for greater flexibility in the plan for the Kwun Tong project. Should the proposed plan be approved, developers would be granted permission to make moderate adjustments to the project in response to market changes, the URA said in its application document.

The project for Development Areas 4 and 5 is scheduled for completion in 2028, according to data from the URA.

“The enhanced development flexibility along with the prime location of the site, which is across from the Kwun Tong MTR station, Sun Hung Kai Properties’ apm Mall and the Millennium City office portfolio, is likely to draw considerable interest especially from heavyweights,” said Eric Chong, director of capital markets research at Savills Hong Kong.

Hotel Conversions

“Retail and hotel sectors suffered the most during the COVID-19 outbreak,” said JLL’s Au. “The outlook of the hotel industry remains uncertain as the city’s quarantine measures and the pandemic (continue).”

During the second quarter of 2022, Hong Kong saw transactions involving hospitality assets leap by as much as 236 percent compared to the preceding three months to reach HK$4.8 billion, according to a report published by Colliers last month.

However, that increase came with developers and rental housing operators converting hospitality properties into residential complexes. This included Weave Living partnering with global investor Angelo Gordon in May to purchase the Grand City Hotel in Sai Ying Pun for HK$900 million, with plans to convert the rooms into apartments under Weave’s Studios brand.