Property

Does Island South Still Shine?

Does Island South Still Shine?Covering 4,000 hectares and home to under 300,000 people, Southern District is one of Hong Kong’s roomiest. It has one of the SAR’s largest densities of recreation and leisure facilities — including parks and playgrounds, country parks, a theme park and 12 beaches — and upwards of 90 kindergartens, elementary and secondary schools. The Southern District is also the location of some of the best international schools operating in Hong Kong. A little bit residential, a bit touristy and a bit industrial (which should be shifting to commercial in the near future), Island South straddles the border between accessible and exclusive.

Commercialising

Comprising Aberdeen, Wong Chuk Hang, Repulse Bay, Stanley, Shek O, Tai Tam, Chung Hom Kok and Ap Lei Chau (the location of Hutchison Whampoa’s massive South Horizon’s development), Island South can be a lot of things to a lot of people. Industrial Wong Chuk Hang has been in the midst of a development boom seemingly forever, largely started when plans to extend the MTR with a South Island Line (East) were announced, linking Admiralty to South Horizons with stops at Ocean Park, Wong Chuk Hang and Lei Tung. Prices spiked, with old industrial buildings seeing jumps from as low as $800 per square foot up to $5,000.

New commercial developments, or redevelopments were predicted to be the next big thing. When Wheelock Properties’ One Island South opened in 2012, it did so to a full house of tenants that paid as much as $13,000 per square foot for what was arguably the area’s only premium office space to then. The same applied to Henderson Land’s Global Trade Square, which quickly followed. Upwards of a dozen new commercial projects are currently in some stage of development in the Wong Chuk Hang area, with purchases looking a lot like residential buyers these days: they are commercial end-users.

Though construction snags on the south line have delayed its opening by roughly six months (now scheduled for the end of the next year), there’s still chatter about Wong Chuk Hang and its environs filling a hole in the stressed office market. The MTR will only help its cause, and perhaps make the district a commercial competitor for similarly rejuvenation-heavy Kowloon East. Not so fast CBRE’s head of research for Hong Kong, Macau and Taiwan Marcos Chan told the China Daily Asia in July. “We are more positive about the long-term prospect of East Kowloon, given its massive scale. Land plots there are much bigger and land supply is affluent. It’s perfect for large projects that can bring in large tenants, including multi-nationals. Leading developers have lots of land in the area and it’s easier for them to arrange infrastructure with government. The planning mix for properties will also be more suitable,” said Chan. It’s unlikely Wong Chuk Hang is going to generate 40 million square feet of floor space, which Kowloon East is on target for.

Kicking Back

Hotel prospects, however, for Southern District are strong, with smaller floor areas complementing the mid-size, three- to four-star hotel industry and the area already home to a slew of visitor attractions (the hiking, beaches and nearby dining at Stanley), chief among them Ocean Park. The venerable park appointed Lai Sun Development to take the lead on its 495-room Ocean Hotel and Marriott to manage it. The hotel should open in 2017. Adding to the hospitality appeal (Southern District has its own website for visitors) are the Transport and Housing Bureau’s plans, announced in September, to radically upgrade rail infrastructure, including an extension to the as yet unfinished South Island Line, by 2026. The seven projects (costing an estimated $110 billion as of now) include a Northern Link and Kwu Tung Station, the Tuen Mun South Extension, the East Kowloon Line, the Tung Chung West Extension, Hung Shui Kiu Station, the South Island Line (West) and the North Island Line. The new southern routes will extend to Aberdeen, Wah Fu, Cyberport and Pok Fu Lam, connecting at the HKU station on the West Island Line and the future Wong Chuk Hang station.

But that leaves the Southern District’s elite residential areas at Repulse Bay and Stanley and all points in between un-serviced. That may not be such a bad thing. Prices in locations such as the Peak, Repulse Bay and parts of Mid-Levels are resilient precisely because of their exclusivity. Limited stock will help too, and like many parts of Hong Kong Island, Southern District is short on developable land. According to the land tenders listed by the Lands Department so far for 2014/15, only one plot at the corner of Shouson Hill and Wong Chuk Hang was purchased for residential use. Emperor International, Shimao Property and Mingfa International paid $2.7 billion for the one-hectare lot and plan to build 20 to 30 luxury houses on the site. At over $30,000 per square foot, whoever moves into the Emperor homes is unlikely to be concerned about an MTR stop.