Swire Properties is expanding its holdings near its Pacific Place complex on Hong Kong island, having bested 20 competing bids to secure a residential site in the city’s Wan Chai area through a government tender for HK$1.96 billion ($249.9 million), according to an announcement made on 21 June.
“We’re delighted to have won this land tender despite fierce competition,” said Tim Blackburn, chief executive of Swire Properties in a press release. “Thanks to its prime location, this plot has enormous potential and will play to our strengths especially when it comes to creating premium, high quality residential developments,” he added.
Swire’s winning bid for the site at 269 Queen’s Road East, which is equivalent to about HK$16,881 per square foot of maximum floor area, was on the higher end of market expectations which ranged from HK$1.39 billion and HK$2.2 billion, with the developer having already sold out the majority of the units in another Wan Chai project located less than a kilometre (0.62 miles) away.
Despite a slowdown in the city’s residential market this year, demand for the site was driven in part by the low supply of government residential land on Hong Kong Island, said Alex Leung, senior director at CHFT Advisory and Appraisal, with the plot’s relatively small scale also helping to bring it within reach of small to medium-sized developers.
Leveraging Pacific Place
“This latest venture will build on our success story in Wan Chai where our Eight Star Street residential project continues to be well-received,” said Swire’s Blackburn.
Eight Star Street, a 30,855 square foot (2,866 square metre) housing project which Swire scheduled to complete in December 2022 is located just behind the developer’s Three Pacific Place. Currently under construction one block closer to this most recent acquisition is 46-56 Queen’s Road East, a 218,000 square foot commercial development on a site that the company purchased in 2017 and expects to complete next year.
“Swire is an expert in building luxury and boutique apartments around their commercial complexes, and it is not surprising that the developer would (expand) to the other end of Queen’s Road East from Eight Star Street,” said Vincent Cheung, managing director at Vincorn Consulting and Appraisal.
On its Queen’s Road East land parcel, the blue-chip developer will likely build residential units atop a retail podium, covering 116,229 square feet (10,798 square metres) of floor area. Cheung estimated that selling prices for the completed flats could run from HK$37,000 to HK$38,000 per square foot of saleable area.
With most redevelopment opportunities in the area taking place through lengthy acquisitions of stratified title ownership in existing buildings, Swire shouldered aside bids from developers such as Sun Hung Kai Properties and Henderson Land Development to win the plot, readying itself to develop a housing project that could be worth nearly HK$3 billion upon completion.
Wan Chai Supply
In Wan Chai, the developer had sold 28 of 37 units at Eight Star Street as of 8 March this year, according to its latest annual report, with selling prices for flats in that project averaging HK$38,900 per square foot of area, according to Alkan Au, senior director of valuation at JLL in Hong Kong.
Also in Wan Chai Swire owns Star Studios, a rental residential project where 240 square foot units lease for HK$20,000 per month, according to online listings from Executive Homes.
Wan Chai is attractive to developers, with prestige office blocks, shops, and public recreational facilities, said CHFT’s Leung, noting that the area is conveniently located between the city’s Central business district and the Causeway Bay retail hub.
A total of 247 housing units will be completed in the area by 2023, Leung noted, citing data from Hong Kong’s Rating and Valuation Department.
In 2021, Swire’s revenue from property trading went up by more than seven fold year-on-year to HK$2.44 billion, according to the developer’s latest annual report published on 1 April, with the firm having identified residential sales in its home market as an area of focus, as the city’s office market slows down.
“Swire Properties is actively exploring residential opportunities in its home market in Hong Kong,” the developer said in its press release announcing the Wan Chai site acquisition.
In a HK$100 billion investment plan for the next decade released in March this year, Swire earmarked 20 percent of that total for new residential trading projects in Hong Kong and mainland China as well as Southeast Asia.