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Street life
Hong Kong’s central entertainment district is rapidly expanding and as it does, it’s ushering in new commercial opportunities on the fringes of Lan Kwai Fong. Jane Drew talks to Raymond Lung, director of Professional Properties Co.
Look back to 1997 and Lan Kwai Fong was a tiny gweilo ghetto limited to just two streets: D’Aguilar Street and the smaller lane, Lan Kwai Fong which connect to form a rectangle. Nowadays not only is it much more multi-cultural, its boundaries are extending and the home-grown restaurants and bars are being replaced by leading retailers and big brands.
“Street level properties in Lan Kwai Fong rented for between HK$75 per square foot and HK$150 per square foot in 1997,” says Raymond Lung, director of Professional Properties Co. “Nowadays landlords are looking at charging between HK$150 per square foot and HK$300 per square foot. Last year commercial rents in Lan Kwai Fong and SoHo rose on average 50 percent, and as much as 80 percent, pushing out the majority of small concerns.”
For those looking to buy prime commercial space in Lan Kwai Fong, prices are prohibitive. “You’d be looking at paying as much as HK$120,000 per square foot for wide or corner street-level properties,” says Lung. “Prices start at HK$50,000 per square foot. That’s an increase of between 60 percent and 300 percent on the average asking price ten years ago.”
Due to rising rents, there is a significant new retail circle forming around Lan Kwai Fong. The boundaries between it and SoHo (and NoHo) are in fact gradually blurring: walk along Wyndham Street towards Hollywood Road and you’ll see that the traditional antique and porcelain shops are being pushed out by premium restaurants, bars and fashion and homeware stores. On Lyndhurst Terrace most of the old ‘mom and pop’ stores have already been ousted, and on Wellington Street you’ll now see the likes of Calvin Klein and herbalist GNC, rather than second- or third-tier brands.
According to Lung, “The rental of street-level properties in and around Wyndham Street has risen between 50 percent and 80 percent in 10 years; now you are looking at paying between HK$90 per square foot and HK$190 per square foot. Sales prices now come in at HK$40,000 per square foot and HK$80,000 per square foot, an 80 percent increase over the same time period.”
Some feel that the mega-retailers are destroying the ambience of the area, so it’s good to see M88, on the corner of Wellington and Wyndham streets, adding a dash of glamour and sophistication. Work finished on Phase I back in 2006, and due to its prime location, M88 quickly became fully occupied. It houses an eclectic mix of retail and entertainment options over nine floors, and tenants include Japanese restaurant Sushi Kuu, contemporary art showroom Opera Gallery, and chic nightspot the Beijing Club. Building on its success, Phase II of the project was rolled out in May 2008 and includes the top three floors – the 17th to the 20th.
While the property has an enviable location in the heart of Central, Michael Fung, director of Luxury Rental Limited, the sole leasing agent for the property, stresses that the developers were keen to keep the rental within acceptable levels.
“Commercial rental in the Central area currently stands at around HK$60 per square foot, and that is what we will be charging businesses residing on the 17th, 18th and 19th floors. For the 20th floor, the rental is HK$99 per square foot, which sounds high, but it comes with over 1,700 square feet of penthouse space.” Phase I tenants, meanwhile are paying HK$50 per square foot, as their rent was set at this price two years ago.
While the threat of competition may trouble some agents, Fung is positive about the arrival of any new commercial developments in the immediate area, and believes these projects would benefit the whole district. “From day one, we realised we can’t just think of ourselves but how we can work with other developments. M88 can’t survive on its own – we are not Taikoo Shing.”
The M88 project serves as a cheerful example to other commercial developers that a drab Chinese building (it was formerly the Tsing Hua Bank) can be transformed into a hip commercial centre. But as Hong Kong runs out of space, developers are becoming less discriminating about where they choose to build.
Just behind M88 along Graham, Gage and Peel streets, the historic markets (they have been here since the middle of the 19th Century) will soon be no more, as they are being forced to make way for new commercial and residential developments. Lung confirms, “People are gradually moving out – the hawkers, shop owners and residents are receiving compensation from the Urban Renewal Authority (URA), but it’s a step-by-step process.”
The government is buying property in the area for around HK$8,500 per square foot, which is what investors are now paying at the low-end in SoHo. What’s more property owners in the streets that fall just outside the government-development area, are also asking HK$8,500 per square foot. Investor interest has been sparked because once the area is furnished with hotels, shops and green areas, prices in the immediate vicinity are expected to go up.
While nothing concrete has been confirmed for the moment, and despite objections raised by the local community, Jimmy Sha URA marketing officer confirms that building will go ahead. An initial proposal suggested that four large towers will go up in the area: a 34-storey residential and commercial building; a 36-storey residential and commercial building; a 30-storey hotel and commercial building; and a 37-storey office and commercial space.
However, there is at least one example of a more considered approach to development in this area, for as Lung points out, Chancery Lane in SoHo situated above the Hong Kong Police Station will be spared from the development of high-rise residential properties, which would have contributed to considerable light pollution in the area. Instead, it will now house restaurants and a museum, which will sit comfortably alongside the art gallery at 10 Chancery Lane.
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