Refining Approach: First Pilot Area Under Large-scale Land Disposal in Hung Shui Kiu, Northern Metropolis

The pilot large-scale land disposal (LSLD) in Hung Shui Kiu / Ha Tsuen New Development Area closes on 3 July 2026 (today), with at least two proposals submitted and expected to have less than five budders. The response demonstrates that market interest remains for large-scale Northern Metropolis opportunities despite a challenging operating environment. As the first project under the Government's new LSLD framework, the outcome will provide an important reference point for assessing market appetite and refining future land disposal strategies, with two further LSLD sites expected to be launched in 2027.

"The Hung Shui Kiu pilot Large-Scale Land Disposal highlights the challenges of aligning policy ambitions with current market conditions. The tender brings together a high degree of complexity, including regulatory considerations, site constraints and concentrated responsibilities, which may affect how the market responds under present conditions. Looking ahead to the 2027 cycle, it will be important to incorporate market feedback alongside policy objectives. Approaches such as phased or rolling tenders, greater flexibility in land use, demand-aligned GFA and building a pre-qualified operator base are well-established practices in comparable international development programmes. Hong Kong has strong fundamentals — including available sites, a robust policy framework and solid financing capabilities. Enhancing structural flexibility could help ensure these strengths are more effectively matched to market conditions,” said Hannah Jeong, Executive Director, Head of Valuation & Advisory Services, CBRE Hong Kong

Mild Market Participation 

Less than 5 bidders in total, is less than what the government originally received on EOI process earlier and promotion they processed over the year. It is due to the several factors that may have tempered bidder appetite according to CBRE:

• The E&T Operator Gap: The most fundamental challenge is the difficulties finding Enterprise & Technology (E&T) operators willing to commit to the scale and duration required. The mandatory requirement for bidders to develop and operate at least HSKTL 19 (10,190 sq.m. site area & 50,950 sq. m. maximum GFA), makes industrial participation essential, yet residential developers cannot identify suitable partners with the track record and financial strength to meet the Government’s technical criteria.
  
  
• Commercial Feasibility: The three E&T sites, spanning over 55,000 sq.m. with minimum GFA of approximately 165,000 sq.m., are expected to generate prolonged negative cash flow. Against estimated residential construction costs exceeding HK$15 billion, overall returns become marginal once E&T losses are factored in. In a soft industrial market with elevated vacancy rates, the risk-adjusted return does not justify the level of capital and time commitment.
  
  
• Regulatory Alignment: The non-premium technical proposal, worth 70% of the overall assessment, recommends advanced logistics as a high-scoring use for E&T sites. Yet the Development Bureau has confirmed in writing that pure warehouse use and 3PL logistics are not permitted under the OU (Enterprise & Technology Park) zone: "As there is no provision for 'Cargo Handling and Forwarding Facility' and 'Warehouse' uses in the Notes of the OU(E&TP) zone, pure warehouse use or 3PL operation is not permitted in this zone." Any logistics function must be ancillary to a qualifying industrial process to be considered at all. The scoring framework and the planning framework are telling developers two different things simultaneously.
  
  Given the long-term nature of the 50-year service deed, developers may seek greater alignment and clarity across zoning, lease conditions and technical assessment criteria. Enhanced coordination across departments could help reduce uncertainty and support broader market participation.
  
  
• Disproportionate Liability: The tender structure places significant long-term obligations on bidders, including a 50-year service deed with operational and financial commitments. At the same time, premium liabilities are joint and several across all sites, exposing residential developers to risks beyond their control. This misalignment between risk and control is incompatible with standard consortium structures.

Recommendations for Large-Scale Land Disposal in 2027 

With two further LSLD sites expected in 2027, the Government has a narrow but real window to recalibrate the framework.

“Hong Kong has a strong pipeline and clear strategic intent for the Northern Metropolis. Incremental refinements that enhance flexibility and reduce uncertainty could help broaden participation and support smoother project delivery in future rounds,” added Eddie Tsui, Senior Director, Valuation & Advisory Services, CBRE Hong Kong. 

1. Rolling Tenders — Remove the Arbitrary Fixed Deadline
   A six-month fixed tender window favours administrative convenience over strategic outcomes. A consortium committing over HK$15 billion and operating an E&T park for 50 years should not be constrained by a binary close date. CBRE recommends a rolling tender assessed on absolute criteria: any proposal meeting the technical and financial requirements should be awarded on a first-come, first-served basis, without waiting for competing bids. This eliminates the void risk of a round attracting zero qualifying bids, removes speculative gaming, and sends a consistent pipeline signal. For a long-duration programme like the Northern Metropolis, certainty of award is worth more than price competition alone.
   
   
2. Enhance Land-Use Flexibility 
   The current model transfers all risk to the private sector while prescribing all uses. Non-contiguous sites with rigid, government-designed allocations, residential here, E&T there, separated by geography, prevent developers from integrating uses, sequencing construction logically, or responding to actual occupier demand. A better model defines outcomes, jobs created, industry type, public facilities delivered — and allows developers to propose the most efficient configuration within a broad policy envelope. Large-scale land realises most value when developers can integrate and optimise. The Government should define what it wants to achieve.
   
   
3. Recalibrate GFA Minimums to Reflect Market Demand 
   The combined E&T minimum GFA across the three sites is approximately 165,000 sq.m. Even at a 60% minimum threshold, the implied scale remains very large relative to current market absorption, with Hong Kong's industrial vacancy still at elevated levels. CBRE recommends a phased GFA model: let the market set minimum first-phase thresholds at a level genuinely supportable by near-term occupier demand, with upward GFA triggers tied to demonstrated occupancy milestones. This preserves long-term policy ambition while aligning near-term supply with market reality. Flexibility on GFA is not a concession. It is the difference between a built, occupied district and a failed tender.
   
   
4. Update the Building Code for a Future City 
   The Northern Metropolis is planned as Hong Kong's next-generation urban centre, yet its developments are governed by a building code designed for an earlier era, which may limit appeal to some occupiers.
   
   Logistics operators typically require low-rise, high-ceiling buildings with internal clearance above 10 metres, while AI data centres need floor-to-floor heights exceeding 6 metres for equipment and cooling. These requirements can trigger “double GFA counting” under the current Buildings Ordinance, affecting the commercial viability of purpose-built industrial designs and discouraging development aligned with operational needs.
   
   While GFA controls are an important planning tool, they were largely calibrated for residential and commercial uses. CBRE recommends considering a Northern Metropolis-specific approach that allows greater flexibility for qualifying industrial developments. In the initial development phase, the focus should be on attracting occupiers with functional, market-relevant space while maintaining a balanced approach to planning objectives.