Sino Group is expanding its Hong Kong Island commercial portfolio with the recent launch of leasing for a Grade A office project in the emerging commercial hub of Wong Chuk Hang, according to a statement.
Landmark South, a 256,957 square foot (23,872 square metre) tower developed under a 60:40 joint venture with Empire Group, is expected to open during the second quarter of this year, with the partners having set monthly asking rents at around HK$30 ($2.85) per square foot, said Bella Chhoa, director of asset management at Sino Group.
The first tenants are expected to move into the office tower by the third quarter of 2022, despite overall vacancy for Grade A offices in Hong Kong creeping up 0.7 percentage points year-on-year at the end of December 2021, according to a recent report from JLL.
Sino Group’s announcement followed a 5 percent full-year slide in 2021 for office rents in Wong Chuk Hang, according to Keith Chan, director and head of research at Cushman & Wakefield Hong Kong.
Wong Chuk Hang Landmark
The 31-storey office tower includes 218,222 square feet of office area, as well as 38,735 square feet of retail space and a 9,200 square foot garden on the eighth floor.
Occupying a 18,996 square foot site at 39 Yip Kan Street, Landmark South is 300 metres (328 yards) from The Southside, an MTR residential project with an attached shopping mall above the Wong Chuk Hang MTR. Empire Group, which was founded by Walter Kwok, the late former chairman of top developer Sun Hung Kai, had formed a consortium with three other developers last year to win development rights for Southside’s fifth phase with a HK$6.44 billion bid.
Sino and Empire had teamed up in 2016 to purchase the site for Landmark South, then known as Aberdeen Inland Lot No.462, at a land premium of HK$2.5 billion via a government land sale, with that price equivalent to HK$8,872 per square foot of floor area.
The new project will “strengthen the group’s diversified property portfolio in the precinct,” Sino said in the statement, as well as achieving synergies with the group’s first joint project with Empire, the nearby Fullerton Ocean Park Hotel Hong Kong, which is set to open later this year.
With Landmark South opening amidst a quiet Hong Kong office market, the project is likely to attract tenants who come to the Wong Chuk Hang area in search of more affordable rents, opportunities to consolidate existing locations or potential upgrades from industrial buildings in the district, said Paul Yien, executive director of office leasing advisory at JLL in Hong Kong.
Though higher vacancy rates continue to bring down rents in Hong Kong’s Central business district, net effective rents in Wong Chuk Hang remain about 70 percent lower than rents in the city’s prime office hub, where they currently average HK$91.30 per square foot per month, according to Yien.
Given the vacancy rate in Wong Chuk Hang of 11.2 percent at the end of December 2021, Yien expects office rents in the district to fall by as much as 5 percent in 2022.
“It will still be a tenant’s market, given thin demand and high space availability,” said Ada Fung, executive director and head of advisory and transaction services for office services at CBRE Hong Kong.
Average rents in Wong Chuk Hang are currently at HK$26.80 per square foot per month, Fung said.
“Landlords in Wong Chuk Hang as a whole will need to be flexible, not only with headline and effective rents,” said Cushman & Wakefield’s Chan. “(They) may need to consider offering fit-out packages or longer fixed rental terms. In addition, they should also consider increasing the F&B elements and amenities such as a gym, supermarket or convenience store in their new projects to create a self-sustainable business environment for their office occupiers.”
Located in the south of Hong Kong Island east of Aberdeen, the one-time industrial hub is now home to office towers such as Swire Properties’ 2018-completed South Island Place, which is less than a kilometre (0.6 miles) from Sino and Empire’s Landmark South project.
South Island Place, in which Swire and Hong Kong-based builder China Motor Bus Co each hold a 50 percent ownership, was included among Swire’s joint venture projects that saw occupancy rates drop by 6 percentage points year-on-year in the six months ended 30 June 2021.
About a year before the completion of South Island Place, Hong Kong-listed Rykadan Capital was reported to have purchased the BT Center, a 15-storey commercial building at 23 Wong Chuk Hang Road, for HK$1.48 billion.
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