Some forecast in the Kowloon Bay, but now it becomes real

Today I had read a news from standard post. This new is talking the stock of land in Kowloon Bay after 2005. Please read below:

Stock of the Bay
12 December 2005
Hong Kong Standard

Defying the laws of physics, if not of real estate, Hong Kong is a city with more than one "core." Every few years, it gives birth to a new one, and the honor, in this first decade of the 21st century, belongs to Kowloon Bay.

Forget Central. Forget Causeway Bay, Quarry Bay and Taikoo Shing. A district that was once mostly factories and warehouses abutting the old Kai Tak airport is where the commercial real estate industry is currently pursuing its holy grail, "Grade A" office space.

In Kowloon East as a whole, the amount of office space is expected to grow 70 percent between now and 2010, making it a match, accommodation-wise, for Tsim Sha Tsui East. By that time, Kowloon Bay alone will be home to 5.7 million square feet of Grade A premises, said Simon Smith, senior director of research at property consultant Savills.

It will be several years before established core areas produce any significant quantities of new office supply. This is being fully reflected in prices. At Two IFC, Central's most prestigious address, for instance, rents have reached a prohibitive HK$100 per square foot per month.

"It's very difficult to find fresh sites in core areas these days," said Smith.

The concept of Grade A space is rather nebulous, referring to buildings with the basic modern conveniences such as elevators, air-conditioning and telecoms ducts, regardless of location.

Not all Grade A office space is created equal, however.

"We do not see top-tier financial institutions moving out of Central," Smith stressed, but there is strong demand for premises in Kowloon Bay from manufacturers, trading companies and back-offices of banks.

The analyst said Kowloon Bay faces no real threat from International Commerce Centre, a 2.5 million square foot monster now under construction in West Kowloon. It is wooing a different target group, composed of bigger multinationals, lawyers and accountants.

Strictly speaking, this is Kowloon Bay's second makeover. The first came at the start of the 1990s when a number of the featureless, low-rise factory bunkers the district was famous for yielded their places to dual-vocation buildings designed for tenants who needed both industrial and office premises.

Sino Land started the trend with its Metro Centre One in 1991, followed the next year by Kerry Properties with the first phase of Enterprise Square. The two developers remain the driving force in the district.

Despite the district's proximity to Kai Tak, developers appear unconcerned about what will become of the former airport lands. Whether Kai Tak, according to the various proposals now circulating, is given over to a cruise ship terminal, a mega-stadium, housing, green space, or all of the above, it will be years _ and many political controversies _ before any of it begins to affect Kowloon Bay.

The focal point of the current transformation is Kerry's Enterprise Square 3, opened last year. A silvery, cylindrical building of 41 stories, it's the architectural standout of the district, especially after dark when the anchor tenant _ the international garment chain Esprit _ switches on its huge red neon sign.

Right next door, Kerry is building Enterprise Square 5, incorporating a 1.1 million sqft retail complex called MegaBox and 500,000 sqft of office space, due for completion in 2007.

Across the street, private developer Glorious Sun has a 680,000 sqft office building under construction.

Behind it, preparation work is under way for a 710,000 sqft office tower for another private builder, Manhattan Realty. Part of the same cluster is Sino Land's new 600,000 sqft office and retail complex, where work is just beginning. Sino purchased the land at a hotly contested government auction in February, forking out a generous HK$1.82billion, nearly three times the government's minimum asking price. Sino chairman Robert Ng, who said the district could easily become as big and diversified as Tsim Sha Tsui East, revealed that the company might also locate a five-star hotel on the same site.

Several streets away, the six-story Sing Tao Building was sold in July to a private developer for HK$370 million. It will probably be demolished to make way for a 500,000 sqft commercial building.

Even if all of these projects are not enough to satisfy the hunger for new offices, there are two Kowloon Bay lots totaling 667,000 sqft on the government's current application list of land that may be sold to developers, said Kenny Suen, managing director of consultant Vigers Asia Pacific.

There's talk as well that a site earmarked for a hotel with gross floor area of 855,480 sqft may be added to next year's list.

It can only be a matter of time before more owners of buildings whose functions don't necessarily fit with the concept of an office district decide to cash in on the land boom.

Though its owner denies having any immediate plans, the Kowloon Motor Bus depot is considered a good candidate for redevelopment. Conveniently enough, the bus company is 33 percent owned by Sun Hung Kai Properties, one of Hong Kong's two largest developers.

The Oriental Daily News building has similar potential. The newspaper moved its main operations to a new plant in Tai Po earlier this year.

The Hong Kong International Trade and Exhibition Centre has long been a disappointment to its owner, Hopewell Holdings. The building, opened in 1996 to provide exhibition and meeting space as well as offices, had an occupancy rate of only 60 percent, according to its latest annual report. Hopewell now aims to turn it into an entertainment destination with total floor area of 600,000 sqft.

And Henderson Land, the No 3 developer in town, is in talks with the government about converting Big Star Centre, opposite the Sing Tao Building, into a 10-story hotel with 296 rooms.

To buy office space in Kowloon Bay now costs anywhere from HK$2,600 to HK$3,200 per square foot, up 40 percent since the start of the year, said Suen. Office rents in the district have climbed almost 16 percent to HK$12- $16 psf per month.

While industrial rents in the district are up 7.3 percent on average to HK$8- $11 psf per month, Midland Realty says the industrial buildings farthest from the Kowloon Bay MTR Station command only HK$5-$7 psf.

"Clearly, if I owned an industrial building in Kowloon Bay, after seeing those figures I would knock it down and put up a commercial building in its place," Suen said.

The population of the areas surrounding Kowloon Bay certainly seems sufficient to support big retail developments such as Kerry's MegaBox.

Suen said Kowloon Bay is a catchment area for nearly three million people. It's estimated there are 100,000 jobs in the district already, a figure that should rise to 120,000 by 2008 as new office buildings open.

"There's a demand for shopping centers for personal spending and office needs," he said.

One problem that could slow the pace of Kowloon Bay's development is inadequate public transportation.

The Kowloon Bay MTR Station is linked to the MTRC's own Telford Plaza commercial complex, but there are no subterranean walkways to connect it with other buildings. Bus stops are sparsely located, and some of the biggest office buildings in the district are at least a half-hour walk from the subway.

The Hong Kong Economic Times recently reported that five developers, including Sino, Kerry and Hopewell, would like to form a partnership with the MTRC to build an elevated light rail system to link their developments with Kowloon Bay Station.

Lam Chan, MTRC projects communications manager, said none of the developers had submitted any proposals yet. The transit operator carried out a preliminary study of the district, according to its 2003 annual report, but Lam said the report had been shelved. Any new transport initiatives will have to be coordinated with the overall planning for the area, he added.

Suen of Vigers believes the developers are still haggling over the proposed route of the light rail line and how to divide up the costs of the project.

The analyst said that, well before light rail becomes reality, there will be a network of footbridges, similar to what exists in Central, to connect Kerry's buildings, notably the MegaBox retail complex, with Telford Plaza and the MTR.

A transitional neighborhood such as Kowloon Bay is bound to produce some stark contrasts before the new finally overwhelms the old _ what Savills' Smith, in the jargon of the industry, calls "interface problems."

For example, both the sleek office towers being built by Glorious Sun and Manhattan Realty will initially stand cheek by jowl with the peeling paint and crumbling masonry of the Yip On Factory Estate, which was built by the Housing Authority in the 1970s.

Suen said the authority may return the land to the government to allow for redevelopment, or heed suggestions to put the buildings to other uses, as "creative arts villages," for example.