Henderson Land and Sun Hung Kai Properties are seeking to convert commercial space into 1,830 residential units within the Hung Shui Kiu and Ha Tsuen New Development Area. the Planning Department has signaled its support for the move, citing a need for housing to support a planned university town and a slump in office demand.
The 1,830-flat pivot in Hung Shui Kiu
Two of Hong Kong's most prominent developers, Henderson Land and Sun Hung Kai Properties , have applied to the Town Planning Board to repurpose approximately 927,000 square feet of commercial space. This area represents about 32% of the total floor area across Sites 32B and 32C. According to the report, the proposed residential development would consist of five towers: Site 32C would feature two towers of up to 30 storeys containing 590 units, while Site 32B would house three towers of up to 43 storeys with at least 1,240 units.
The Planning Department has indicated it does not object to this rezoning, which typically suggests that final approval is likely. This shift reflects a strategic move by Henderson Land and Sun Hung Kai Properties to align their portfolios with current government priorities and market realities in the New Territories.
A 25.27% vacancy rate in Kowloon Bay
The push for residential conversion is a direct response to a hemorrhaging office market. As reported, Grade A office vacancy across Hong Kong currntly sits at roughly 16%, but the situation is significantly worse in non-core districts. In Kowloon Bay, for example, the vacancy rate has climbed to 25.27%, making the prospect of building massive amounts of pure commercial space a high-risk venture.
This trend is part of a broader repositioning of the Northern Metropolis. The Development Bureau has emphasized that housing is now a critical requirement to support the university town planned for the district, ensuring that students and faculty have local residential options. by allowing this conversion, the government avoids the risk of creating nearly 3 million square feet of empty office floors in a market that is already struggling to fill existing space.
Why the Elite Centre's 1,140 units were rejected
The approval for Hung Shui Kiu highlights a stark contrast in how the Town Planning Board treats different districts. A similar attempt to convert the Elite Centre on Lam Chak Street in Kowloon Bay into two residential towers with 1,140 units was flatly rejected. Despite the fact that the Planning Department did not object to the Elite Centre proposal, the Town Planning Board stepped in to block it.
The rejection of the Elite Centre project stems from the site's location in the mature Kowloon East core business district. Because the Elite Centre possesses 770,000 square feet of functioning commercial space, officials feared that converting it to residential use would erode the district's status as Hong Kong's second-largest commercial hub. This suggests that while the government is flexible in new development areas like Hung Shui Kiu, it remains protective of established commercial cores.
The 2033 deadline and the land-premium hurdle
Even with the Planning Department's blessing, the path to completion by 2033 is fraught with technical and financial obstacles. Because residential buildings are less dense than commercial ones, the remaining commercial portions of Sites 32B and 32C would see their plot ratios jump to 10.76 and 14 times, respectively. this increase raises significant concerns regarding ventilation and views, which will require complex design solutions from Henderson Land and Sun Hung Kai Properties.
The most critical unknown remains the land-premium negotiations. After rezoning is finalized, the developers must negotiate an in-situ land exchange and premium payment with the government. With property values currently in a correction phase, it is unclear if the developers and the government can reach a financial agreement that makes the project viable while still hitting the 2033 target. The report notes that agreement on these premiums is the ultimate key to delivery.
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