New Business Districts Why Success or Failure

Transcription

1 New Business Districts Why Success or Failure Date : 17 September 2011 By Augustine Wong Henderson Land Development Co. Ltd.

2 Traditional Business Districts Insufficient land for new developments Source of land supply Reclamation e.g. IFC Complex, Jardine House, Exchange Square, etc. Not allowed nowadays except overriding public interest under Protection of Harbour Ordinance

3 Traditional Business Districts Source of land supply Redevelopment of aged buildings On private lots only Limited supply from Government e.g. (a) Central Market Building - Site area 44,703s.f. - Refurbishment (b) Government Hill - Site area 61,570s.f. - Reduced development intensity - GFA 452,088s.f. (Plot Ratio 7.34)

4 Traditional Business Districts OZP of Central District

5 Emergence of New Business Districts Decentralization New office supply in areas outside Central Island side Admiralty, Wan Chai, Causeway Bay, North Point and Quarry Bay Kowloon side Tsim Sha Tsui East, Hung Hom, Mong Kok West, Kowloon Bay and Kwun Tong Potential areas Kai Tak, Kowloon Station

6 Successful New Business Districts Some office nodes are more regarded by general public than other areas e.g. Admiralty, Quarry Bay and Causeway Bay Successful Factors Good transportation infrastructure, e.g. MTR Not far away from Central Ownership pattern A single major owner of office towers in these areas Admiralty : Swire Group Quarry Bay : Swire Group Causeway Bay : Hysan Group Taikoo Place

7 Admiralty Held by Swire Group Source : GeoInfo Map

8 Quarry Bay Held by Swire Group Source : GeoInfo Map

9 Causeway Bay Held by Hysan Group Source : GeoInfo Map

10 Admiralty Ownership Pattern Southern side of Queensway Controlled by Swire Group Pacific Place : 5-stars hotels, office towers and a large shopping mall Northern side of Queensway Under strata title ownership e.g. Admiralty Centre, Lippo Centre, Queensway Centre and Far East Finance Centre MTR connection is better than the southern side

11 Ownership Pattern Admiralty Area Source : GeoInfo Map

12 Ownership Pattern General impression to public Pacific Place is more regarded than its neighbours on the northern side Advantages of control by a single major player Promotional activities can be well co-organized Tenant mix is carefully planned Large tenants who lease several floors can deal with a single landlord

13 Ownership Pattern Tsim Sha Tsui East Comprehensively planned by Government with 5-stars hotels, office towers, shopping malls and residential towers Poor transportation link in the past Many buildings under strata-title ownership, while a number of buildings under single ownership

14 Ownership Pattern Tsim Sha Tsui East No single major player No single mega development Generally not regarded as a successful business district

15 Ownership Pattern Tsim Sha Tsui East Area Source : GeoInfo Map

16 Town Planning & Land Administration Land grant document Very difficult to be very specific on the details Lease term of 50 years, impossible to take into account the future development Even if MLP is required, it only covers physical layouts, landscape proposal, but not the software side Leave with the market to deal with the details of development, in particular the software side

17 Town Planning & Land Administration Extracts of Government Lease of Wing On Plaza, No. 62 Mody Road

18 Town Planning & Land Administration OZP and its notes for Wing On Plaza, No. 62 Mody Road

19 Free Market versus Planned Mix Free Market Usual belief : Market will find out the best way to use the land Everyone will maximize the income, buildings will have the users which will give the highest return on their own However, each person is only interested in its own economic benefits Competition among different owners, no co-ordination

20 Free Market versus Planned Mix Planned Mix If there is a major player in the area, then a well balanced tenant mix will come out e.g. Cinema and theme restaurant They can attract people and enhance image of the area Their rentals may be much less than retail shops But the rentals from other portions in the same area will be increased A major player can afford to take the overall return into picture when making business decisions

21 Importance of A Single Major Player Comprehensive planning for the whole area Important factors for a successful new business district Physical planning Quality of buildings Property management Marketing Well balanced tenant mix e.g. Fitness centre The return of the whole portfolio is being considered

22 Importance of A Single Major Player Marketing With the presence of a single organization to co-ordinate marketing events for the whole area, the more easy for the area to be well know by public

23 Importance of A Single Major Player Marketing Tsimshatsui East as an example Strata title ownership is common in the area No orchestrated efforts in marketing of the area Individual owners are interested in their own interest Some users paying high rentals but adversely affecting image of the area are still welcome by individual owners Image or quality of the whole area are scarified

24 Importance of A Single Major Player Tenant mix Organic in nature Landlords need to respond to market movement and have the development renovated and with tenants replaced Such change can be expected only with high concentration of ownership

25 Importance of A Single Major Player Tenant mix Worldwide House in Central An example illustrating problem of fragmentation of ownership No renovation or major change in tenant mix for many years

26 Worldwide House

27 Conclusion A major player is important for development of new business districts But a large piece of land will be required to be put up for sale Huge capital investment Only a few players can afford to participate in sale Government will then be easily be criticized for favoring a few large developers and degree of competition is not high enough A magnet or large key development in new business district will definitely help to make it a success

28 Q & A