Hong Kong's largest developer in terms of value has just set a new record with the purchase of the biggest piece of commercial property in the city for HK$42.23 billion or roughly $5.4 billion. The commercial property that was purchased by Sun Hung Kai Properties is located in a prime area in Austin Road, sitting on top of the West Kowloon High-Speed Rail Station.
Sun Hung Kai Properties officially won the bidding of the commercial land with a big of HK$13,345 per square foot. The land was placed for bidding with an expected price range of HK$41.1 billion to HK$63 billion.
The area purchased by the company is roughly the size of 47 Olympic swimming pools. Sun Hung Kai has the option of developing the area into a 3.17 million square feet structure, which can be used as a hotel, office, or retail space. The parcel of land is around 12 percent larger than the International Commerce Center.
Sun Hung Kai won the bid at the lower end of the range, beating other major property developers such as CK Asset Holdings. Sun Hung Kai went into the bid with a number of partners including Henderson Land Development, Chinese Estate Holdings, Lifestyle International Holdings, Sino Land, and Wharf Holdings.
Market analysts have stated that Sun Hung Kai's winning bid was definitely lower-than-expected, which could be likely due to the current market situation in Hong Kong. If it were not for the civil unrest and the ongoing trade dispute between China and the United States, the winning bid could have been higher.
Apart from the aforementioned factors, general uncertainty in the market has caused investors to be very conservative. The city's higher mortgage caps have also forced developers to reconsider their current projects given that buyers are now likely going to go for larger homes.
Current property owners in the area have also raised concerns over the low winning bid price as it could force them to cut their standing asking prices and rents. Office and commercial space renting in the city has significantly deteriorated over the past six months as civil unrest continues. The sector has seen an increase in vacancy rates, capital values, and rents over the period.
Sun Hung Kai's chairman and managing director, Raymond Kwok Ping-Luen, stated that the company was "very happy" about the recent acquisition. Sun Hung Kai is currently inviting other long-term investors to take part in their planned development of the commercial space, which will be built to synergize with the nearby International Commerce Center.
