Oil Street site likely to defy decline

HONG KONG: The tender for a former government supplies depot in North Point is expected to attract keen interest from developers despite last week's poor land auction result and the volatile share market, which has sapped market confidence.

Six surveyors polled this week by the South China Morning Post maintained their earlier valuations on the commercial-residential site on Oil Street, which range from HK$6.47 billion to HK$9.07 billion (RM2.48 billion to RM3.48 billion). The tender will close on Friday at noon.

"I don't think we should be too pessimistic about the tender of the Oil Street site," said Victor Lai Kin-fai, chief executive of property consultancy firm Centaline Professionals.

"Before the auction of the Kau To site last week, the tender results of many government sites were better than market expectations. The poor auction result for the Kau To site happened just after the stock market slump, but share prices have since climbed and are looking more stable in these past few days."

The site for luxury flats at Kau To, Sha Tin, was auctioned eight days ago, when the Hang Seng Index fell to a 52 week-low of at 19,330.7 points. The site was sold for the opening bid of HK$5.5 billion, or HK$5,332 per buildable square foot, 24% lower than the lowest estimate. But Lai said he would stick with his original forecast of HK$8 billion, or HK$10,500 per square foot, for the North Point tender. Located on the harbourfront, the Oil Street site has been vacant for about a decade. The government announced in February that it would offer the site for tender with the aim of boosting land supply.

An area of 84,896 square feet and a plot ratio of 8.9 gives the site a total gross floor area of 755,633 square feet. At least 42.7% of the floor area must be used for hotel purposes, while the rest can be flats or offices.

Ringo Lam Chun-chiu, valuation director at A.G. Wilkinson & Associates, believes four or five developers, including Cheung Kong (Holdings), Henderson Land and Sun Hung Kai Properties, will bid for the site — either alone or as part of a consortium — attracted by the fact it is in the urban area and less than 10 minutes' walk from the Fortress Hill MTR station. Lam said these developers had projects nearby or had expressed interest in the site.

"Apart from the hotel, I think developers will prefer building flats to an office tower," he said. "The location does not have a strong advantage as an office hub, while it has a mature residential market." He said the site was likely to fetch HK$6.47 billion, or HK$8,562 per buildable square foot. The flats would sell for at least HK$13,800 per square foot.

Vincent Cheung Kiu-cho, Cushman & Wakefield's national director for valuation and advisory services, also said developers would prefer building flats to offices. He maintained his forecast of an HK$8.38 billion winning bid, or HK$11,094 per square foot, because prices in the neighbourhood had not changed much recently.

Cheung said developers would want the site because it had harbour views and was on Hong Kong Island.

Ricacorp Properties head of research Patrick Chow Moon-kit said the tender result would be a sign of developers' market confidence and the outlook for the three to four years.

"Property prices are close to their peaks now and the market situation may be different when the project will be completed in about three years. If developers think flat prices will go down, they will have to decide... by how much they will fall."

Chow said he was unsure what developers might be thinking after last week's auction, but he expects the site to sell for at least HK$11,000 per buildable square foot, equating to more than HK$8.31 billion.

Midland Surveyors estimated the price at HK$9.07 billion, while Knight Frank predicted HK$8.53 billion.

Earlier this month, Wheelock Properties won a Hung Hom commercial site for a higher-than-expected price of HK$4.028 billion, or HK$6,827 per square foot. — SCMP