(Bloomberg) -- Hong Kong sold a rare land parcel in the Causeway Bay area for a higher-than-expected price, a sign of recovery for the city’s commercial real estate market.
The government sold the site to Hysan Development Co. and Chinachem Group for HK$19.8 billion ($2.5 billion) in a public tender, according to a statement. That exceeds a previous valuation of about HK$15 billion by Midland IC&I Ltd., reflecting optimism from developers that Hong Kong’s office and retail markets will rebound.
The 14,802-square-meter (159,330 square-foot) land plot provides a rare opportunity to build new commercial property in a prime shopping district. It can yield a maximum of 100,000 square meters of floor area. However, the premium site comes with demanding clauses, including retaining a portion for community facilities and 125 public car parking spaces.
Hong Kong’s office and retail sectors were the worst hit during the double whammy of anti-government protests and the pandemic. Global banks including BNP Paribas SA and DBS Group Holdings Ltd. have been downsizing their office space in the past year after the work-from-home trend emerged. The drop in demand resulted in a plunge in office rents in Hong Kong.
Rental values in Central’s grade A buildings have fallen 24% since the start of 2020, government data show. Rents are expected to fall 7% in 2021 as tenants seek to reduce costs, according to Colliers International.
Disappearing tourists and social distancing measures during the pandemic also took a toll on the retail market. Rents for shops have dropped 11% from their peak in mid-2019, according to government data.
Other bidders in the tender included Sun Hung Kai Properties Ltd., Wheelock Properties Ltd. and CK Asset Holdings Ltd.
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