Kai Tak’s third-largest plot is sold to six local developers for HKD12.6 billion

A consortium of six Hong Kong developers have agreed to pay HKD12.6 billion (USD1.6 billion) for Kai Tak Area 4C Site 2 – the third-largest plot of residential land on the runway of the former Kai Tak airport, forking out a record price for the prime oceanfront real estate in the area as a property bull market resumes in the world’s costliest city. The winning consortium of developers comprised China Overseas Land & Investment, Chinachem Group, Empire Development, Henderson Land, New World Development, and Wheelock Properties. With a developable gross floor area of 641,168 sq ft (59,566 sq m), the price translates to a land cost of HKD19,636 (USD2,517) per sq ft. Additionally, with an estimated profit margin of 20% and an investment amount of HKD18 billion for the development, valuers estimate that the apartment complex could be priced at over HKD30,000 (USD3,846) per sq ft. (Source: SCMP, 7 May 2019)

Research View

While the government has been urging for new land resources for the long-term land supply, the Kai Tak area remains as the last oasis in an urban area set to provide the largest amount of flats to accommodate a potential population of about 90,000. The close proximity to the cruise terminal, the potential future monorail system, combined with sea views of Victoria Harbour, should add value to the development. Whilst the record-setting price of the site in the Kai Tak area demonstrated developers’ confidence in the future of Hong Kong’s housing market, the development will also be able to enjoy synergies with the nearby sites won by the consortium.


 

Hysan unveils a new retail concept for Lee Gardens

Hysan Development Company has unveiled a new digital retail concept for Lee Gardens in Causeway Bay. The ‘New Retail Revolution’ concept will be implemented across six key aspects - smart community, co-marketing, consumer experience, retail technology and big data, omni-channel communication, and third-party collaboration. Hysan has deployed a high-speed Wi-Fi system for the area, an e-Directory across 200 interactive screens and an e-gift certificate system. Hysan unveiled a blueprint including plans for mobile app updates, a consolidated customer relationship management system, and the use of big data analysis. In addition, Hysan has teamed up with Hong Kong's largest restaurant portal OpenRice to offer an e-dining system. (Source: ComputerworldHK, 8 May 2019)

Research View

With a 257% smartphone penetration rate and more than 57,045 Wi-Fi access points1, Hong Kong is now ready for a digital transformation of its retail offerings amid the rising millennial and experiential shopping trends. Whilst mall loyalty programs allow landlords to extend their relationships with customers through artificial intelligence, big data on individual’s shopping behaviours and location-based marketing can help expand their customer base. We believe the digital transformation of malls should help support and drive retail performance, as it is likely to attract Mainland Chinese shoppers who embrace e-retailing in their home towns.

1 Key Communications Statistics, Office and Communications Authority


 

US increases tariffs on USD200 billion of Chinese goods

US President Donald Trump increased tariffs on approximately HKD1.6 trillion (USD200 billion) of goods from China and plans to go ahead with preparations to impose 25% tariffs on all remaining imports from China, which are valued at approximately HKD2.5 trillion (USD325 billion). The move came after discussions between President Xi Jinping’s top trade envoy and his US counterparts in Washington made little progress on 9 May, according to people familiar with the talks. Meanwhile, China’s Finance Ministry announced on Monday that it will increase tariffs imposed on about HKD470 billion (USD60 billion) worth of US goods from 1 June, in retaliation to Donald Trump’s latest escalation in the trade war. (Source: Bloomberg, 10 May 2019; Bloomberg, 13 May 2019)

Research View

While the trade war between the world’s two largest economies continues, the market had higher hopes that a deal or an agreement would be reached in the near-term. However, the latest tariff moves and raises by the two governments now, once again, point to a bumpier outlook for the trade war. We believe that the increased uncertainty around the trade talks will weigh on economic growth in the short-term, leading to a more risk-averse, wait-and-see attitude in the market, which may slow down corporate decisions in general and result in a more sluggish momentum across different commercial sectors.