Government stands by brownfield operators in Yuen Long case, saying price is not important

Hong Kong's government has shown its determination to help displaced brownfield operators find space for their businesses.

In June, the Development Bureau revealed that it had postponed the due date for Yuen Long Town Lot 545 (YLTL 545) tender submissions to 27 December 2024 to give interested parties more time to consider their proposals. 

This lot is the first multi-storey building (MSB) site to be put up for tender that would achieve the government's dual-policy objectives of promoting industrial development while consolidating brownfield operations space in the most land-efficient manner while assisting them in upgrading their operations. These brownfield operations have been displaced by the government's various projects, such as the Northern Metropolis.  

Background

Yuen Long Town Lot 545 (YLTL 545) is slated to accommodate MSBs for modern industries. It should produce a GFA of around 1,740,000 sq. ft. (161,651.2896 sq. m). The government wants 30% of that space, which it will lease to the brownfield operators.

Yuen Long Town Lot 545, located on Fuk Wang Street and Wang Lee Street, Yuen Long, New Territories, has the strategic advantage of Yuen Long's easy access to locations in the Qianhai Shenzhen-Hong Kong Modern Service Industry Co-operation Zone. The Shenzhen Bay and Lok Ma Chau control points are a 20-minute drive away. Hong Kong International Airport, which has retained its title as the busiest cargo airport in the world, is 30 minutes away.

Stakeholders' concerns

Given the government's requirements, private-sector stakeholders were circumspect as doing so would reduce the prospective rental incomes from their investment. Their reticence is understandable, given the prolonged punishing lending costs, the pace of Hong Kong's economic recovery, and geopolitical tensions.

The expedient answer would be to drop the requirements for the brownfield operations. However, the Development Bureau is not about to sacrifice its principles. The government announced the delay two days before tender submissions were due to close on 28 June.

Speculation is rife

Given the recent lacklustre government land sales performance, there is speculation of limited or even no suitable bid. But, a Development Bureau spokesperson recently assured that this was not the case – the stakeholders only needed more time to make better proposals.

In this tender, interested parties are required to use the two-envelope method, which requires more in-depth information about development planning . Thus, proposals do take longer to formulate. The spokesman also asserted that the price was not a key consideration.

However, as the spokesperson pointed out, the new closing date for the Yuen Long tender coincides with the closing date for tenders of two sites in Hung Shui Kiu.

The Hung Shui Kiu strategy

In May, the government announced that the community isolation facilities in Hung Shiu Kiu would vacate their sites. These sites would also be used for MSB per the original planning intention. 

The Hung Shui Kiu Sites have already been included in this year's Land Sale Programme. As both the Hung Shui Kiu Sites and the Yuen Long Lot can be designated for modern logistics use, there have been views in the market that the government should better arrange the disposal timeline of these sites so investors can concurrently consider the strategic development of both. 

The government is now expediting the preparatory work for the Hung Shui Kiu Sites, which aims to tender in September at the earliest. Details will be announced in due course.

Thus, extending the tender closing date for the Yuen Long Lot to later this year is a decision made in response to the market's call for room to consider these two sites more thoroughly. 

The Hung Shui Kiu sites

The Hung Shui Kiu sites are located in Areas 39A and 39B of Hung Shui Kiu and Ha Tsuen, Yuen Long, New Territories. They now comprise Hung Shui Kiu Town Lot 10, with an area of about 836 355.84 sq. ft. (77 700 sq. m.) and a maximum GFA of about 5,856,000 sq. ft. (544 000 sq. m.). The government will continue to adopt the two-envelope approach for the open tender of the Hung Shui Kiu Sites. The specific disposal schedule and related details will be announced in September at the earliest.

Conclusion

With interest rates still at a 23-year high in Hong Kong, it is unsurprising that developers would be extremely cautious in making decisions for multi-billion investments.  Adding technical details requirements to the tender submission perplexes developers and this may be an area the government should take a close look at to encourage active tender participation.