The development of the West Kowloon Cultural District (WKCD) is finally underway. The 40 hectare precinct is intended to further develop Hong Kong’s arts and cultural credentials, and is set to become one of the biggest cultural districts in the world. A number of theatre and exhibition spaces have already opened such as the Xiqu Centre, Freespace and the M+ Pavilion, while the Art Park open space area is also now open to the public.

The overall plans for the WKCD also include a significant amount of office space with the intention of attracting “Cultural and Creative Industries” (CCI) tenants to these projects. The Hong Kong Census and Statistics department defines CCI to include sectors such as advertising, architecture, design, software, television and more[1]. The most significant project planned at present is the Art, Commerce and Exhibitions (ACE) development, which is currently undergoing a tender process. The developer chosen to deliver ACE, will be able to construct approximately 870,000 sq ft of hotel and office floor space on the U shaped land allocated, with completion targeted in 2024/25. Further into the future, there will be a number of other buildings with office components that could deliver in the range of 800,000 to 1 million sq ft of additional commercial office floor space.

Source: JLL, West Kowloon Cultural District Authority

To get an indication of the depth of the CCI tenant market, we analysed the past three years of Grade A office leasing transactions to identify the amount of office floor space committed by these tenants. The data suggests that CCI accounted for slightly less than 4% of total office floor space leased over that period. Of the specific industries that make up CCI, advertising was the most active, accounting for 33% of space leased, while architects and interior designers were the next most active representing 24% of the total.

By applying this figure to the total occupied stock in Hong Kong, we can get an estimate of the potential market for CCI tenants, which measures approximately 3.5 million sq ft. On this basis, it appears that there is sufficient depth in the market, even if a further 1 million sq ft of office is delivered in the WKCD over the next 15 years or so. In terms of which existing office sub-markets might be affected, approximately 35% of CCI tenants are currently located in Hong Kong East and another 21% in Kowloon East. Just 15% were in Central. Taking into account current rental levels in these districts, the future WKCD office rental market is likely to trade somewhere in the range of HKD 40-60 per sq ft per month.

[1] CCI includes Art, antiques and crafts; Cultural education and library, archive and museum services; Performing arts; Film, video and music; Television and radio; Publishing; Software, computer games and interactive media; Design; Architecture; Advertising; Amusement services

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