Local boutique developer V wades into the traditional leasing sector

Local boutique developer V wades into the traditional leasing sector with its latest property in perpetually popular Mid-Levels

Among Hong Kong’s myriad housing issues is the lack of private rental options. Outgoing Chief Executive CY Leung acknowledged the dearth of purpose-built rental buildings in his final Policy Address, vowing to add more rental units to the public housing agenda. In the meantime, boutique service apartment operator V Group is wading into the rental market with its first ever residence: Castle One by V.

Entering a Complex Market

Following its foundation as a management firm 1994, V Group launched its first serviced residence in 2006, and currently operates properties in Wanchai, Causeway Bay, Happy Valley and West Kowloon. For its 10th anniversary the group is branching out into, for lack of a better word, standard residences. Adhering to a more traditional leasing model — a first for the group — facilities will obviously be managed, but tenants should not expect housekeeping services, bathroom amenities, linens, and so on. In other words, Castle One by V is a regular rental flat — furnished or unfurnished — in two-year leases.

V was fortunate when it came to the planning for Castle One by V. Four months from start to finish in negotiating the former property sale, Castle One by V straddles two lots that have been brought together. First came a 3,000-square foot site, and later V managed to broker a deal for the building behind it that held 12 flats on an additional 6,000 square feet.

“It’s very hard,” begins V Group director Anna Mae Koo in explaining how difficult the current market is for boutique developers. “We’re a small operator and we don’t have the infrastructure and reach of the big guys to be able to pick up a 10,000-square foot plot in a sale.”

Castle One by V, whose neighbours are Swire’s Alessio and Phoenix Property Investor’s Gramercy, separates itself for being a rental property at those levels, but according to research by JLL, the luxury leasing sector is facing considerable challenges, with rental growth falling in all sub-sectors year-on-year to July 2016. With once lucrative expatriate housing packages in the financial services sector now favouring local contracts, the leasing sector is compressing. The best performers to last summer were flats smaller than 1,000 square feet and priced below $40,000 per month. In a similar vein, serviced apartment rentals have fallen to roughly $68 per square foot (on average), with standard leasing on the island sitting at $48 per square foot. Mid-Levels in particular took a big hit after peaking with gains of 9.7% in 2014. JLL projects rental values in the luxury sector will fall off by up to 5% in each of 2017 and 2018.

So was the switch to residences a response to the softening serviced apartment market? “Not at all. Our serviced apartments are doing very well,” says Koo. “This is an extension of our brand. We want to bring the same detail and attention to our residences as define our serviced apartments. And a private rental building is a rare find in Mid-Levels.”

Castle One by V is indeed likely to find a market if JLL’s projections are correct, particularly in light of the property’s pricing, which sits in a similar sweet spot as its serviced apartments: rents at Castle One by V begin at $32,000 per month, with penthouse duplexes starting at $95,000. “We think there are plenty of professionals and executives looking to rent long term, and we already have [tenants] from Causeway Bay ready to make the move here,” theorises Koo.

Deco Luxe

Perched at the Mid-Levels junction of Caine and Castle Roads (1 Castle Road to be precise), and looming over the red brick of the Dr Sun Yat Sen Museum, Castle One by V is a 30-storey new build tower comprising 112 units. Designed with an Art Deco eye, tenants are greeted by a fully provenanced parcel-gilt wrought iron gate in the lobby, setting the tone for the remainder of the public spaces. Castle One by V has balanced Deco accents in the shared spaces with a more low key approach in the apartments themselves. It’s there, but its not overwhelming, and it does feel like you’re stepping into The Great Gatsby when you step into the elevator.

Castle One by V features five units per floor; one- and two-bedroom flats and duplexes, plus a penthouse with a private rooftop, ranging in size from 401 square feet to 1,050 square feet. The furnished suites will be outfitted with pieces by Italian manufacturer Molteni & C, while all suites feature contemporary, space-efficient Varenna kitchens, complete with sliding doors and open concepts that allow them to disappear when not in use. Kitchen appliances are by Miele; Kohler hardware and Claybrook fittings are in bathrooms.

Each flat has at least a small balcony, and though some of the bedrooms are typically Hong Kong (there’s very little room to manoeuvre around the beds), living and dining rooms have classic rectangular designs that exploit all available floor space. Building amenities and services include a state-of-the-art fitness centre (equipped with LifeFitness gear), a semi-outdoor lap pool, dining (for 10), kitchen and karaoke function rooms in the “Play” area, multiple outdoor terraces, 24-hour security and concierge services.

As V Group continues to expand — its next project is a collection of individual houses on Peak Road — Koo and Co are not limiting themselves to Central and Wanchai. “We’re a Hong Kong brand. We’re big on Hong Kong and proud to be here, and we want to be a developer,” says Koo. “We’re always actively looking for opportunities in every part of the city, not just the island cluster.”

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