1) Record-breaking government land sale for a residential site in Cheung Sha Wan

News

A consortium of local and mainland developers comprising Sino Land, Shimao Property Holdings, Wheelock Properties, K Wah International and SEA Holdings has bought a waterfront site in the former industrial area of Cheung Sha Wan for a record price of HKD17.28 billion (USD2.21 billion). With a total GFA of 986,789 sq ft (91,676 sq m), translating into HKD17,500 per sq ft, the site could potentially supply more than 1,200 housing units. The transaction broke the previous record for a government land sale set in February, when a residential site in Ap Lei Chau was sold for HKD16.8 billion (USD2.16 billion). (Source: SCMP, 15 November 2017)

Valuation View 

The transaction price stayed at high end market expectations. We expect the sales price to be about HKD31,000 (USD3,985) per sq ft on saleable area, which is nearly a double of the transacted price of the four major residential developments in the same district, including AQUAMARINE, Liberté, Banyan Garden and The Pacifica which have a building age ranging from 12 to 14 years. Moreover, the expected sales price is 40% above the pre-sale price of residential complex Cullinan Wes, located above Nam Cheong MTR Station.


Research View

Collaborating with PRC developers by building joint ventures not only lowers individual investment risk but also could be used as an option for local developers to compete against large mainland Chinese property development groups. Given Cheung Sha Wan is going through a transformation into a larger residential and commercial hub, upcoming developments will benefit from new amenities in the area. Cheung Sha Wan was once the fourth largest district in terms of residential supply with over 4,400 private residential units being completed over the past decade, however, with the slow construction of 1,400 units which started since 2015 it has now dropped out of the top 10. The government has been exploring the possibility of lowering the threshold of ownership consensus for “compulsory sale” of industrial buildings.  If implemented, we would see more residential supply from Cheung Sha Wan which it has a larger stock of industrial buildings.


2) DHL’s HKD2.9 billion investment will boost its Hong Kong capacity by 50%

News

DHL Express, one of the biggest express service providers in the world, said that it would invest HKD2.9 billion (USD371 million) to expand the capacity of its Central Asia Hub (CAH), the logistics centre at the Hong Kong International Airport, by 50% to cater to the rapidly growing international trade demands in the region and around the world. DHL reported that once the expansion is complete in the first quarter of 2022, the hub would be able to process 125,000 shipments per hour compared to its current rate of 75,000 units. When operating at its full capacity, the annual throughput of the expanded hub is expected to go up by 50% to 1.06 million tonnes per year. (Source: SCMP, 15 November 2017)

Research View

We expect Hong Kong's trading and logistics market to stay steady due to firm global demand. The development of emerging economies and the Belt and Road initiative will create demand for international forwarding services. The USD253 billion trade deals signed between the U.S. and China this month should enhance China’s import demand which in turn will benefit Hong Kong’s re-export business. According to DHL Express, the facility will be equipped with fully automated X-ray inspection machines to increase the speed of shipment inspection. We should see an increasing application of new technology to further enhance the operation efficiency at key logistics facilities. The overall outlook for 2018 should stay positive thanks to the lack of new warehouse supply. (Source: SCMP, 9 November 2017)


3) TST office market to benefit as the high-speed rail project getting closer to reality with the joint customs checkpoint arrangement signed

News

Hong Kong Chief Executive Carrie Lam signed joint checkpoint agreement on 18 November 2017 that will allow mainland Chinese officials to carry out immigration and customs procedures in the future West Kowloon terminus of the Guangzhou-Shenzhen-Hong Kong express rail link. The agreement was the first in a three-step process, with an endorsement from Beijing’s top legislative body, the National People’s Congress Standing Committee (NPCSC) in next month, being next, and then the government would begin the third step – introducing local legislation in February next year. (Source: SCMP, 18 November 2017)

Research View

The completion of Express Rail Link in Q3 2018 will make TST the gateway between Hong Kong and other major mainland cities along high-speed railway network (XRL).  Futian, the CBD of Shenzhen, will only be 15 minutes away from TST by speed rail. XRL will breathe a new life to TST’s stable office leasing market, especially for TST West which has the largest Grade A office stock in TST along Canton Road.  We foresee the new demand from PRC companies in TST West will emerge following the opening of the XRL and rents in TST will move up faster in the coming years.