Hong Kong’s government has released the most amount of commercial land for sale in over two decades to meet demand for commercial, industrial and residential development.
Throughout the 2019/20 financial year, 8.8 million square feet of land in seven commercially-zoned sites will be scheduled for sale, including two unsold sites from the previous Land Sale Programme, according to a government announcement. This brings the total number of sites for sale in the program to 22.
“This is a good start to fix the acute supply shortage in the city’s Grade A office market,” says Rita Wong, Head of Valuation at JLL Hong Kong, although she cautions that ‘supply will still remain constrained over the near term.”
Tightening office supply has been a major concern for Hong Kong. The vacancy rate for Grade A offices has fallen from 11.9 percent at the start of 1999 to 2.0 percent at the end of 2018, resulting in escalating rental costs for occupiers in what is already one of the world’s priciest property markets.
“If the city is to benefit from the growth of the Greater Bay Area, the Hong Kong government must ensure that there is adequate land supply to meet demand both over the short and longer-term,” Ma says.
“A failure to do so will further erode the city’s competitiveness as a regional business hub.”
A further eight recommended options proposed by the government-appointed Task Force on Land Supply will provide additional Grade A office stock, and ease vacancy rates in the coming years. These include reclamation outside Victoria Harbour and the development of the East Lantau Metropolis,
A new CBD
Among the seven recently announced sites, six will be in the city’s Kai Tak Area where supply is needed most.
“The release of the sites at Kai Tak will help accelerate the development and emergence of the Kowloon East central business district,” says Denis Ma, Head of Research at JLL Hong Kong.
“It will also likely lead to a significant jump in the vacancy rate four to five years down the road. Demand for office space in Kowloon East is expected to rise once the cross-harbour section of the Shatin-Central-Link opens in 2021.”
The site above the West Kowloon Station of the Guangzhou-Shenzhen-Hong Kong Express Rail Link – potential new space spanning over 3.1 million square feet – will be the largest and one of the most coveted commercial sites to be made available in recent years.
More land for homes
A total of 15 residential sites – of which seven are new – providing an estimated 8,850 units – are also being made available as part of the programme.
Taking into account supply from other sources – including the MTR Corporation, Urban Renewal Authority and private development – the estimated 15,000 private residential units that will be available in the upcoming financial year is 14 percent lower than the government’s annual target of 18,000 private flats per annum.
In its latest policy address, the government committed to raising the ratio of public to private homes in new developments to 70:30, up from 60:40.
“With more land being made available for subsidised housing units, some buyers will be drawn away from the private market, further dampening the demand for nano-flats that trade at comparable price points,” says Wong.
“This should ultimately reverse the recent trend of developers building smaller units.”
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