Rent at office tower redeveloped on The Excelsior’s site may be the highest in Causeway Bay amid shortage of commercial space
- Mandarin Oriental Hotel Group will redevelop The Excelsior into a 26-storey office tower at a cost of US$650 million
- The redeveloped office tower is the only new commercial space under development in Causeway Bay for the next few years, analysts say
The office tower to rise from where The Excelsior hotel stands on the foreshore of Hong Kong’s Causeway Bay may command the highest rent in the district by the time its redevelopment is completed in 2025, barring a catastrophic economic meltdown in Hong Kong.
The site, known as Lot One, was the very first piece of land sold in Hong Kong when the city became a British colony in 1841. Jardine Matheson, one of Asia’s largest and oldest conglomerates, has owned it ever since, putting up the 869-room hotel on the site in 1973.
“We have to be practical,” said Mandarin Oriental’s chief executive officer James Riley. “If one looked at this site and the value that could be realised from redeveloping the building as a hotel, it was significantly less than the value that could be realised from redeveloping it as an office block.”
The vacancy rate of Hong Kong’s prime office space stands at about 2 per cent, a chronic shortage that has driven rental prices to the highest in the world, making the city the costliest urban centre to maintain an office. Barring an economic meltdown, that vacancy is likely to hold steady, as there is a dearth of new commercial space being developed in the next five years, analysts said.
Causeway Bay is also transforming from a shopping and entertainment area into a commercial district, as some professional firms have already been pushed out by Central’s eye-watering rents to look for cheaper space elsewhere. And no other office tower is being developed in Causeway Bay over the next five years , said Eric Ong, chief operation officer of Midland IC & I, a real estate agency.
