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The Lok Ma Chau Loop could start a space race

Hong Kong CVAS 20230118 Lok Ma Chau 1536x1040 r1

Science island could be a beacon for tech giants, but will they be happy to exchange sprawling campuses for vertical living?

In the final days of 2022, the Innovation, Technology and Industry Bureau laid out its blueprint for Hong Kong’s development in the I&T sphere. While the latest 78-page document did not provide an explicit roadmap, past policy announcements show that the Northern Metropolis – a mega-development in Hong Kong’s northern region – is the lynchpin of this vast plan.

The government has set ambitious targets to double talent, startups, and unicorns in the city within the next decade. And while there are plans to encourage high-fliers to apply for work permits, we still do not know precisely how the brick-and-mortar development will unfold.

Finding talent is a priority

Hong Kong has a lot to offer businesses looking for an HQ in Asia, being an advanced city, a financial leader with the freest market in the world. It has a trusted legal system which is adhered to by most of the world, low taxes, and a high standard of living.

As the People’s Republic of China’s “front of house”, Hong Kong is a gateway to the hinterland, not least of which is Shenzhen, its direct neighbour and I&T (Innovation & Technology) powerhouse. As the Greater Bay Area – which covers nine cities in Guangdong Province, Macao, and Hong Kong – becomes even more intertwined with further transport and border links, it puts the great South China economic engine within Hong Kong’s reach. 

The Lok Ma Chau Loop

If the GBA is the bridge that integrates Hong Kong with the mainland, its capstone is the Lok Ma Chau Loop, in the northeast of Yuen Long, on the Hong Kong-Shenzhen border and the banks of the Shenzhen River. It will be home to the Hong Kong-Shenzhen Innovation and Technology Park, a deep cooperation zone on science and technology. Next year, the first stage of the 87-hectare construction will complete, delivering eight of the planned 67 buildings. These are being built by the HK government and will be leased to occupiers. The remaining buildings will be either government-private partnerships or completely private. 

Hong Kong CVAS 20230118 Lok Ma Chau map r1

The Loop is expected to cost the government around HK$18 billion and provide 1.2 million sq. m. of office and laboratory space. There are hints it might become a closed-loop data exchange pilot, allowing scientists access to mainland data which currently is kept within mainland borders – bound to be an irresistible proposition for research and development. 

"The Loop could be a "special zone within a special zone and a special zone between special zones."

As the former president of the Hong Kong University of Science and Technology mentioned in 2008, the Loop could be a "special zone within a special zone and a special zone between special zones". But, as yet, we don’t know.

What tech-focused MNCs really want

The gap between needs and reality is not easy to fill, in most respects, because of the perennial issue of land supply. If Hong Kong wants to attract the big fish, it needs a big pond – i.e., larger land plots. 

By analysing technology-focused MNCs, it is evident that these companies identify strongly with their campuses which become part of their branding. The campuses are massive and often iconic. Take Google, for example, or even closer to home, Alibaba, which prefers low, sprawling, green campuses. Alibaba Cloud’s new campus opened in Hangzhou in October 2022 and is slightly bigger than Googleplex, Google’s Silicon Valley estate. It spans 2.1 million sq. ft. and offers 450,000 sq. ft. of office space. 

"Alibaba Cloud’s new campus opened in Hangzhou in October 2022 and is slightly bigger than Googleplex, Google’s Silicon Valley estate."

Hong Kong might need to embark on a charm offensive to convince potential occupiers that vertical life can also work for tech campuses. These companies want their space to move, evolve and be adaptable to their changing needs. Large floorplates and flexible design are at the forefront of their wish lists, right up there with infrastructure.

However, while the Loop might not be ready to accommodate sprawling low rises, they can be built in the wider Northern Metropolis (e.g. San Tin Technopolis). This would give potential occupiers a jump start – getting their research going, taking advantage of Hong Kong and Shenzhen’s scientific base while planning a larger headquarters at a more leisurely pace.

To this end, the government should consider offering bigger plots to give creative minds room to breathe.

And any ESG-conscious company will want biophilic design, green certification, and smart buildings, all of which the Loop can offer. In fact, it has already won green certification for its design.

Information on time

The government also needs to let stakeholders know further in advance about when lots will be available, as companies of this scale require extensive planning before taking the plunge. Developers must have as much time and information as possible to make informed decisions.

Making those plans and discovering all the ins and outs of a property deal should be as frictionless as possible. Standard land exchange rates, fast-tracking planning applications, and details of future infrastructure should be made as transparent and as early as possible.

Development of the Northern Metropolis

The government has lamented Hong Kong’s lack of momentum on the GBA, while the developers and investors lament the lack of details. Hong Kong’s other two science and technology facilities do not have sterling results, as they struggle to bring their ideas to market. Solving the chicken-and-egg issue will not be easy.

"We expect the government will offer tenants incentives and provide built products. We also expect more I&T land to be earmarked in the San Tin Technopolis."

Some researchers suggest that investors might be impatient and expect results too soon. We expect the government will offer tenants incentives and provide built products. We also expect more I&T land to be earmarked in the San Tin Technopolis.

Secretary for Innovation, Technology and Industry Sun Dong told the media that the SAR is willing to “give specific supportive policies to strategic enterprises to develop and set up businesses in hong Kong. As yet, no one knows what these policies might entail.

Concerns from the private sector

Given that the Lok Ma Chau Loop and other parts of the tech revolution are relatively new, private sector concerns are to be expected – specifically about demand from occupiers. 

We suggest that investors should survey rents in similar regions in Shenzhen to gauge rental income. This does not alleviate concerns that startups might find rents unaffordable, and with no concrete government support planned, we’re left with many variables.

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Hannah Jeong

Head of Valuation & Advisory Services

Valuation & Advisory Services

Hong Kong

Hannah Jeong has extensive valuation & advisory services experience over 17 years including property investment and development projects specialising in valuation, development consultancy, financial analysis and feasibility studies. Project’s geographic coverage span across Asia Pacific and Middle East, in particular Hong Kong, China and Korea. She has started her career with Colliers since 2006 and is now heading our Valuation and Advisory Services - Hong Kong Office with over 40 professionals.

Hannah has strong client coverage on major financial institutions including global real estate funds and private equity firms.

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