Changes afoot for Hong Kong’s Admiralty office market

August 23, 2018 / By  

Located on the eastern fringe of Central, the Admiralty office market will undergo significant transformation over the next several years as new office buildings and the expansion of the Admiralty MTR station bring a new focus to the area.

The redevelopment of the former Murray Road Multi-storey Carpark (MRCP) will be the first new building to be completed. The 32,800-sq ft site, which was acquired by Henderson Land for a record HKD 23.3 billion in May 2017, will be developed into a 465,000-sq ft commercial office tower. With construction already underway, the new 35-storey office tower is expected to complete by 2022.

CK Asset Holdings has also recently announced plans to redevelop Hutchison House into a new 493,500-sq ft commercial office tower. Based on approved plans, the new 41-storey building, which is located across the road from MRCP, will be close to twice the height of the existing Hutchison House when complete in 2023.

The biggest development in Admiralty, however, will be the redevelopment of Queensway Plaza. Previous feasibility studies commissioned by the Planning Department have recommended for the development of a 38-storey office tower atop of a five-storey retail/dining podium with a total GFA over 1 million sq ft. The office portion of the development will provide about 862,200 sq ft of floor space. Queensway Plaza is currently leased to Lane Crawford with the lease to expire in January 2019. If no extension is granted, then the site could be made available for sale as early as the upcoming financial year.

The completion of these new Grade A office buildings will coincide with solidification of Admiralty as a major transportation hub. Admiralty MTR station has undergone extensive expansion in recent years and currently serves as a major interchange for the Island Line, South Island Line and Tsuen Wan Line. From 2021 onwards, the station will also serve as the terminus for the future Shatin-Central Link. Admiralty will also continue to serve as a major hub for the city’s extensive bus network, with the current interchange under Queensway Plaza to be preserved under the redevelopment plans.

The combination of new transport infrastructure and office buildings will draw a new group of tenants into the Admiralty cluster. The arrival of PRC tenants into the Admiralty area has already contributed to Grade A office rents rising 9.1% over the past year; faster than the Central core where rents rose by a more modest 6.1%. When the MRCP was sold last year, the premium paid to secure the site implied average monthly rents in excess of HKD 200 per sq ft to produce a rental yield above 3%. Whilst this appeared high at the time, a growing number of PRC tenants have more recently agreed to rentals at these levels in some of Centrals’ best office buildings. With rents continuing to rise and PRC tenants showing an increasing interest in the Admiralty area, it’s not inconceivable that these new buildings will command similar rents.

Admiralty’s new office towers will be complimented with the construction of a new building to house the city’s High Court as well as other commercial office developments in the surrounding area including new buildings in Wanchai and the development of the New Central Harbourfront Site 3. Together, all these new developments will blur the boundary that currently separates Admiralty from the Central office core.

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