Earlier this year, the Government announced plans to promote the development of Wong Chuk Hang as a new commercial office node on Hong Kong Island. This led some to ponder the type of office market that would eventually emerge in Island South. Armed with an abundance of redevelopable land and a future MTR rail line, the new office node is being promoted as being only two stops from the CBD and a competitor to Hong Kong East. By our estimates, the redevelopment of existing industrial buildings could yield about 10 million sq ft of commercial office floor space, which would put it on par with the current size of the Tsimshatsui Grade A office market.
However, unlike the city’s two other non-core office markets, Hong Kong East and Kowloon East, Wong Chuk Hang lacks a clear lead developer to help drive the development process. Rather, what currently exists, is a fragmented ownership base with differing economic rationalisations behind redevelopment. Without a lead developer, the potential to develop a cohesive commercial office district within a reasonable timeframe will be challenging.
Moreover, a large number of the potential redevelopment sites are relatively small by modern commercial Grade A office standards. The fragmented ownership base will make it difficult to amalgamate sites for larger scale developments. Land premiums in the area are also expected to rise considerably after the high sales prices achieved at One Island South, a new Grade A office building completed earlier this year. Faced with higher land premiums, some developers may opt to build industrial office buildings for office use rather than Grade A quality offices.
Hence, while the potential exists to develop a new commercial office node in Wong Chuk Hang, the type of office product that is initially built, may not necessarily be to a standard that will be able to directly compete with the Island’s other more established office markets.
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