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HONG KONG, 17 January 2012 - The proposed transformation of Kowloon East into Hong Kong’s next-generation Central Business District (CBD) will be key to the continuing success of the city as a global financial centre, according to Jones Lang LaSalle in a white paper on Hong Kong’s Grade A office market landscape.
The report highlights the vital role that the proposed CBD2 district will play in Hong Kong’s evolving master-plan for commercial space stretching eastwards from the traditional CBD heart of Central, towards Taikoo Shing and all the way across the harbour to Kowloon East.
Projections by the real estate consultancy estimate a potential stock growth of 14 million sq ft net (about 18 million sq ft gross) within the areas of Kwun Tong, Kowloon Bay and Kai Tak over the next decade. This would lift the district’s total Grade A office supply level to about 26 million sq ft net, bringing Kowloon East roughly on par with the size of Central as a commercial district.
The paper also called for an interim plan enhancing the traditional commercial locations on Hong Kong Island to address the anticipated supply vacuum of new buildings over the next 10 to 15 years before the maturing of the CBD2 plan.
For instance, the evolution of Wanchai North, Causeway Bay and Hong Kong East into core business locations outside Central can be supported through Government initiatives to help speed up the refurbishment and redevelopment of existing office space, accelerate the incorporation of stratified buildings and the expansion of core commercial clusters, including the connectivity of these locations and the addition of improved amenities within.
The paper noted that only a certain number of the buildings within the above clusters needed to be re-developed to achieve the necessary results, citing the commercial cluster surrounding the Wanchai government office complex (namely Wanchai Tower, Immigration Tower and Revenue Tower) as an example. By releasing the three towers to private developers for re-development, the Government would be able to expand the supply of buildings with large podium floor plates, which were lacking in Hong Kong and highly sought after by the finance sector.
Similarly, existing commercial premises in parts of Causeway Bay as well as the areas surrounding Quarry Bay and Taikoo Shing could benefit from the same redevelopment treatment by portfolio landlords into similar sought-after large floor plate buildings. In Causeway Bay, the paper also recommended that the authorities embark on initiatives to support private developers with improved infrastructure and streetscape to enhance the location’s business credentials.
According to Jones Lang LaSalle, government incentives to encourage developers within the private sector to participate as partners in driving change would act as a catalyst to bring about greater CBD re-development. This could take the form of the introduction of action areas and enterprise zones as locations within the mentioned districts, as well as bonus GFA for refurbishment or re-development projects.
“The suggested measures, coupled with the proposed CBD2, should dovetail seamlessly into a broader city-wide commercial real estate plan that will entrench Hong Kong firmly in the forefront of global finance, alongside London and New York,” said Marcos Chan, Head of Research, Greater Pearl River Delta, Jones Lang LaSalle, Hong Kong.
The paper highlighted the importance of efficient commuting between Kowloon East and the current Hong Kong Island CBD to ensure the success of CBD2. These included improved connections to Kowloon East by direct express routes, for instance by leveraging on the Shatin to Central Link, a truly integrated monorail system that could connect the commercial developments within the CBD2 area with the key MTR routes, as well as the Wanchai Bypass.
A second suggestion involved facilitating the right developments to attract large MNC occupiers, particularly within green-field sites in the Kai Tak area, as there was limited scope to control the plot sizes of existing brown field redevelopment sites in Kowloon Bay and Kwun Tong.
“We believe that Kowloon East has every potential to fulfil the Government’s aspirations of turning it into Hong Kong’s next generation business hub,” said Gavin Morgan, Deputy Managing Director and Head of Leasing, Jones Lang LaSalle, Hong Kong. “But to achieve this, we need to see appropriate commercial real estate clustering across Kowloon East and extensive gentrification works to complete its metamorphosis from an industrial district to a commercial centre.”
“It goes without saying that every CBD needs to be “hardwired” with accessible Grade A office buildings with large floor plates, environmentally sustainable features and sufficient car-parking spaces,” he added. “But any cosmopolitan businessman will tell you those quality hotels and serviced apartments and a wide variety of places to hold conferences, eat, socialize, exercise, and shops are just as important.”
“We are confident that Kowloon East will not just succeed as a fully-fledged heavyweight CBD if the proposed moves are implemented,” he added. “It will also go a long way to enhance Hong Kong’s overall commercial real estate strategy and keep its competitive edge over other regional financial centres in the medium to long term.”
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