Hong Kong’s $2.8 Billion Art Hub to Close Property Price Gap
Hong Kong’s $2.8 billion plan for an arts hub in West Kowloon may cement the area’s status as a luxury neighborhood to rival high-end established suburbs across Victoria Harbour.
The 40-hectare (99-acre) West Kowloon Cultural District, to be designed by Norman Foster, the architect behind London’s Gherkin tower, will be flanked by Hong Kong’s tallest skyscraper and the terminal for an express railway to cities in China. Foster’s selection ended almost 10 years of wrangling between the government, developers and art groups that had held up the area’s transformation.
“If you take into account West Kowloon’s location and all the transportation links that’ll be available in the future, its potential is huge,” said David Ji, Hong Kong-based head of research for North Asia property consultant DTZ. “It’ll be the first stop for many mainland visitors to Hong Kong, and their spending power is enormous.”
Foster’s plan for gardens, hotels, theaters and restaurants will replace undeveloped reclaimed land that now mars West Kowloon’s harbor frontage. Back from the water, luxury apartments including Sun Hung Kai Properties Ltd. (16)’s The Arch and Hang Lung Properties Ltd.’s HarbourSide, have been built, along with the International Commerce Centre, which lured Morgan Stanley, Credit Suisse Group AG and Deutsche Bank AG to move their local headquarters from Central on Hong Kong Island.
Apartments in the West Kowloon district cost more than twice those in the east London districts of Canary Wharf and Wapping, an area that lured investment banks from the City of London after Britain’s tallest office tower was built there in the 1980s.
A 1,000-square foot apartment in West Kowloon costs an average HK$15 million ($1.9 million), according to Wong Leung- sing, a research director at Centaline Property Agency Ltd., Hong Kong’s biggest closely held realtor. A two-bedroom apartment in the east London areas is 531,000 pounds ($850,000), according to Savills Plc, the U.K.’s largest property broker.
Home prices in Hong Kong rose at the fastest pace globally in the fourth quarter, gaining 20 percent from a year earlier, according to the Knight Frank Global House Price Index. U.K. home prices climbed 0.7 percent in the period.
‘A Good Mix’
About 36 percent of the real estate in the 17-venue West Kowloon harbor-front development will be venues for visual and performing arts, galleries and studios, according to Colin Ward, a Hong Kong-based partner at Foster & Partners, whose master plan for the project was chosen by a government-appointed committee last month. The rest will be hotels, housing and commercial buildings, he said.
The site, which juts into Victoria Harbour in front of the ICC and to the east is adjacent to the Tsim Sha Tsui shopping hub, will feature venues including a modern-art museum, opera house, 19-hectare green park and shopping malls.
“It’s not just about culture,” said Ward in an interview. “We’re making it a place where people want to go to. We’re taking that and putting culture into it so we get a good mix. We don’t want it to be a place just for the enlightened and privileged.”
The project will add to a stable of work by Foster in the former British colony, including HSBC Holdings Plc’s (5) local headquarters and Hong Kong International Airport.
The area is about a 10 minute train ride from Central and within walking distance to Tsim Sha Tsui, which houses some of the city’s biggest museums and existing performing arts venue. The government plans to erect at least two multistory office buildings atop the express railway terminal in West Kowloon when the project is finished by 2015.
“By the time the art hub is set up there should already be a critical mass of office spaces, shopping malls, residential buildings to turn the area into a core commercial and tourist district,” said Simon Lo, Hong Kong-based director of research at Colliers International.
Average home prices in West Kowloon are HK$9,774 per square foot, having caught up with the HK$9,869 for the Western and Central districts on Hong Kong Island, including Mid-Levels, traditionally favored for its proximity to Central.
The development is expected to be finished in phases from as early as 2015, Hong Kong’s Chief Secretary for Administration Henry Tang said on March 4. The initial proposal was originated as early as 1998 by the administration of former Chief Executive Tung Chee-hwa.
The government began selling reclaimed land in the district for luxury apartments during the late 1990s and early 2000s, as part of a plan to spruce up areas along the railway and freeway connecting Central to the new airport on Lantau Island, according to Eddie Hui, a professor in the building and real estate department of Hong Kong Polytechnic University.
“There’re a real potential for both commercial rents and residential prices to go up even more with the addition of all this hardware,” said Lo at Colliers, the Seattle-based property broker. “The area has already come a long way.”
West Kowloon lies to the west of Yau Ma Tei and Mong Kok, former blue-collar areas housing factory, dockyard and fruit market workers. Today they are bustling, middle-class shopping districts for everything from cooking equipment to sneakers and jewelry, electronics and pirated compact discs. Mong Kok, one of the most densely populated areas in the world, is home to the city’s biggest red-light district.
The government set up the West Kowloon Cultural District Authority to oversee the development in 2006 after the project was halted because the three bidding consortiums -- including a joint-venture by Sun Hung Kai and Cheung Kong (Holdings) Ltd., the city’s two biggest developers -- failed to agree to the amended plan.
Named “City Park” primarily because of the inclusion of the green park and a 2.2 kilometer (1.4 mile) seafront promenade, the plan by Foster’s London-based firm beat proposals by Hong Kong-based Rocco Design Architects Ltd. and Office for Metropolitan Architecture, Rem Koolhaas’s Rotterdam-based outfit. Koolhaas helped design the CCTV Tower in Beijing.
The three, each paid HK$49 million by the government for their designs, were short-listed from among 12 firms which were in turn picked from a pool of 109. Foster was also behind the original design shelved in 2006 that featured a giant canopy covering parts of the art hub.
Elements from the two losing designs may be incorporated to Foster’s master plan, said Ronald Arculli, chairman of the Hong Kong stock exchange and a member of the committee responsible for the selection.
While the benefits for West Kowloon are undisputed, the art hub’s contribution to Hong Kong’s overall economy are questionable, said Bob McKercher, a professor at The Hong Kong Polytechnic University’s school of hotel & tourism management.
“This will be a project that will benefit mostly the local population and artists,” he said. “Normally, an art hub project of this sort only has limited impact on tourism unless there’re certain thematically driven festivals.”
The number of Chinese visitors rose 26 percent in 2010 to 22.7 million and is expected to gain another 10 percent this year, according to the city’s tourism board. Chinese buyers accounted for more than a third of new luxury home purchases in the second half of 2010, according to Centaline Property Agency Ltd., the city’s biggest closely held real-estate agency.
“The area is going to get only more popular among mainland visitors,” said Simon Smith, Hong Kong-based head of Asian research in Hong Kong at London-based Savills Plc. Luxury home prices in popular areas such as Mid-Levels and Happy Valley on the Hong Kong Island “will find it hard to keep up with that of West Kowloon.”
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