Hong Kong's land-starved builders seek heritage projects for urban plots, cultural cachet

Jessville in Pok Fu Lam, 1881 Heritage, Li Ka-shing’s, CK Asset Holdings, Alnwick Chan, St. George’s Mansions

Hong Kong’s property developers have increasingly taken an interest in heritage projects over the past five years, as such developments enhance their corporate image and let them access valuable urban land.

The number of such projects has risen despite the higher costs and longer time frames involved, said Candy Chan, vice-president of external affairs at Hong Kong Institute of Architectural Conservationists (HKICON) and director of consultancy Property Conservation Company.

“In the past, some might choose to demolish [old properties]. Redevelopment can be faster. But now some developers agree to keep [these structures] voluntarily,” she said.

The higher interest in heritage projects among builders comes amid an overall bull run in the property market in Hong Kong, the world’s most expensive real estate market. Prices continue to rise despite speed bumps created by social unrest and the coronavirus outbreak over the past three years.

Recent projects with a preservation element include New World Development’s State Theatre in North Point, Jessville in Pok Fu Lam and Kowloon Development’s plan to build high-rise flats at the site of the former St Joseph’s Home for the Aged in Clear Water Bay.

Heritage projects such as 1881 Heritage, a former headquarters of the marine police in Tsim Sha Tsui, attract bigger tenants such as Puyi Optical, Chan said. The 130-year-old site was revitalised and transformed by Li Ka-shing’s CK Asset Holdings, and hosts luxury shops, fine dining restaurants, hip bars, a heritage hotel and the Heritage Hall, which allows visitors to learn about the history of the development.

Some tenants like such properties as they match their brands, and they may pay higher rent for that, Chan said. Heritage can be a positioning or an attractive selling point that will attract tenants.

Conservation projects cost more and can take more time because of additional government requirements and approvals. They are also more difficult because of constraints such as space and access for machinery. “If there is a good response, I believe others will follow suit,” Chan said. “I hope the government will drive more of such private projects [that involve the] preservation of historical buildings.”

In Hong Kong, declared monuments are protected against demolition by the law, but graded historic buildings are not, Chan said. So when building plans or applications are submitted for historic buildings, the government can suggest that they be preserved. The destruction of such buildings does not mean a breach of law. For example, the Union Church on Kennedy Road in Mid-Levels was demolished despite being graded as a historic building.

“Because of social responsibility and corporate image, some companies are willing to, in such situations, incorporate preserved heritage … in their redevelopment proposals,” said Alnwick Chan, managing director at Knight Frank and chairman of the General Practice Division at The Hong Kong Institute of Surveyors.

“Buyers and renters will feel it is a status symbol,” he said, adding that people who were middle class or above liked such projects, as heritage was viewed as worth appreciation, and such a feature could distinguish these homes from regular housing estates.

But such projects could be challenging in terms of time frames, the effort involved and approvals, Alnwick Chan said. More departments would be involved when it came to approvals, for instance. If some projects needed to be open for public visits, then they would have to satisfy government requirements for opening times and arrangements.

Every project also required extra investment in different shapes and forms. CLP Group and Sino Land’s Argyle Street project, which is now called St. George’s Mansions, needed to keep a clock tower and part of the building for public exhibitions, so there was a capital cost and an operating cost. In some situations, such as Jessville, a premium was needed to be paid to the government.

As urban land was scare in Hong Kong, developers did not mind working on heritage projects, said Alex Leung, senior director at CHFT Advisory And Appraisal. But there had been few successful cases in terms of commercial return, he added.

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