Wong Chuk Hang has developed rapidly supported by government initiatives and will become an area of commercial towers, upmarket residential developments, and shopping malls. Rosaline Fu of Valuation & Advisory Services sees this area as an area of focus for investors. Also on the investment market, Backy Fung of Capital Markets & Investment Services is of the view that demand of industrial assets will continue to rise in the second half of this year. Read on to find out more on-the-ground observations from our experts.
Wong Chuk Hang investment prospects boosted with latest news
Wong Chuk Hang’s recent development has been a new point of focus for Hong Kong real estate investors. Boosted by the government’s new Industrial Building Revitalisation Scheme and Invigorating Island South initiative, there has been significant growth in commercial and residential development. The Grade A office building Marina 8, which opened this month, will bring approximately 147,000 sq. ft. GFA office stock to the market, and the MTR’s Wong Chuk Hang Station Package 1 to 6 residential development will see approximately 3,850,000 sq. ft. GFA residential stock, and Package 3 will add 500,000 sq. ft. GFA in retail stock.
Another key role of the district is to become a new tourism destination. In January this year, the government announced pivoting Ocean Park’s position from theme park to new resort and leisure attraction. Ocean Park was gifted the ever-popular Jumbo Floating Restaurant from its owner last year, and announced in June this year that its Water Park would open this summer.
The government is also seeking a developer for the Park’s new Retail, Dining and Entertainment zone at the lower park area. However, that developer will have to enter a Build-Operate-Transfer (BOT) partnership and could require an investment of up to HK$5 billion. The tender is expected to be released at the end of this year.
While we cannot say whether the initial terms of the deal – expecting the developer to bear the construction cost and share any profits with the government – will attract a scrum of willing partners, the result is sure to boost the area’s permanent and transient population, making it even more attractive to investors.
Demand for industrial assets remains strong in H2 2021
Industrial properties continue to remain as the most investible asset class due to their relatively low unit price and the favourable policies adopted by the government. This is encouraging investors to look for opportunities to convert industrial buildings into other uses such as mini-storage, cold storage, logistics and data centres. This fundamental demand is created by new business operating models which has created value in the post-pandemic era. Examples are the transactions of Yip’s Chemical Building in Fan Ling bought by Friendly Storage, as well as China Resources Logistics recently acquiring two industrial buildings namely East Asia Industrial Building and Mineron Centre. These support the trend that there will be continued strong demand for industrial assets in H2 2021.
On the other hand, even though 25/F and 26/F of The Center were recorded as being transacted at a low-price level of HK$25,000-HK$26,000 per sq. ft. recently, transaction volume of commercial assets remains at a low level, despite demand for office space in Central increasing due to falling rents. So comparing with industrial assets, commercial assets remain less attractive for investors in the time being.