When available land has become exhausted in Hong Kong’s Central Business District, developers have always managed to find more. Land reclamation has provided the solution in the past. Now the government is trying a different strategy: building an entirely new CBDin a different part of the city.

Chief Executive Donald Tsang dubbed the project “CBD2”. He outlined the initial plans for development of Kowloon East during his Policy Address on Oct 12. The plan incorporates development works and initiatives at the vacant KaiTakAirportand industrial areas in adjacent Kwun Tong and KowloonBay.

The announcement of a new Central Business District came only days after the Royal Institution of Chartered Surveyors submitted a report saying the critical shortage of office space in Hong Kong, posed a serious threat to Hong Kong’s global competitiveness. The report, handed to the government on Oct 6, contained a comprehensive study of the city’s grade-A office space.

Tsang’s Policy Address acknowledged and recapitulated the concerns. “To capitalize on the fast-growing opportunities of the Mainland and sustain Hong Kong’s position as a leading financial and business center, a steady and adequate supply of quality office space is pivotal,” he said.

Just 12 days after Tsang’s Policy Address, Property Brokerage Colliers International released a report declaring that Hong Kong’s grade-A office space is the world’s most expensive at $213.7 per square foot. Despite an anticipated fall in commercial rental costs worldwide, Colliers forecast that Hong Kongwould retain the dubious distinction of having the “world’s most expensive offices”. The Colliers International report cited two principal caused: a low vacancy rate in Central District and lack of new office development throughout the Special Administrative Region.

Kowloon East will undoubtedly help alleviate high-end rental pressure in the CBD. But it will be a long time before CBD2 properties come on stream. Secretary for Development Carrie Lam said the development would not complete until 2030 at the earliest.

Lam said Kowloon East promises to introduce roughly 4 million square meters of floor area. That can be delineated as 1.06 million at Kai Tak, 2.9 million from the redevelopment sites in Kwun Tong and KowloonBay, combined with an existing 1.4 million square meters of floor area already extant in Kowloon East.

CBD2’s potential floor area would be twice the size of Central District, but Lam emphasized that it would not replace Central. “This is not Central the second. The most important business district will remain in Central,” she said at a press conference, the day after Tsang’s Policy Address. She defined Hong Kong’s current CBDas Central, Sheung Wan, Wanchai and CausewayBay, Tsim Sha Tsui and West Kowloon.

Alan Seigrist — one of the founders of the Executive Centre, the largest serviced office provider worldwide — said CBD2 is good news, albeit belated. The Executive Centre operates locations throughout Hong Kong’s commercial districts.

“Once rents in Central started hitting close to $200 per square foot a month, there was a realization that the Hong Konggovernment wasn’t managing the allocation of new space in the city, and I think that’s really when (the government) realized that East Kowloonis the appropriate place for a new business district,” he said.

Urban planners scrapped office space from various high-profile developments in recent years. Seigrist said waterfront reclamation in front of the new Tamar Government Headquarters had originally included plans for a large office component, scaled back in response to public complaints that the new structures would have blocked harbor views. Similarly, he said early plans for the West Kowloon Cultural District featured a larger office space component. Only the ICCTowersurvived the repeated design revisions for West Kowloon.

“Now (the government) is not politically in position to build more offices in West Kowloon, which is really unfortunate because-in my opinion — that’s where they should be having the Kowloonoffice district,” he said.

Seigrist said exorbitant prices in Central District might encourage some in the financial sector to relocate to other Asian financial hubs, such as Singapore(where he said grade-A office space in the CBDis available at a cost 30-40 percent less); however, high-end office space is currently and increasingly available in KowloonBayfor a fraction of the cost.

Fiona Ngan, General Manager of Colliers’ Kowloon Office Services, said that the current grade-A office rental in Central costs between HK $80-180 per square foot compared to HK $20-24 per square foot in Kowloon East.

“Price disparity still exists in the short run since the infrastructure in Kowloon East is yet to be completed. We foresee that the disparity will be narrowed after completion of Kai Tak cruise terminal,” Ngan said.

The cruise terminal building is part of the Kai Tak Development Office’s first phase of a three-stage development slated for completion in mid-2013. Other components of the first phase include public housing and infrastructure projects. A waterfront promenade is also slated to open in the next few years. Other Kai Tak additions include a stadium, park, hospital, along with commercial and residential properties, scheduled for completion by 2021.

A Hong Kong-based Dutch architect and urban planner contends a multi-use design is essential for the CBD2. Stefan Al, who teaches at the Universityof Hong Kong’s Schoolof Architectureis also a member of the Harborfront Commission, that advises government planning departments on ways to make VictoriaHarbormore vibrant and diverse.

Al said that the Development Bureau seems to be heading in the right direction, based on the preliminary plans for the commercial district; however, the term “Central Business District” comes from a now-outdated urban planning philosophy, he contends. 

“CBDis a modernist concept from early 20th century Europe, when some architects decided for a modern city to function, it would be better to separate the uses, so there would be one area just for offices and other areas would be for residential,  solely,” he said.

Commercial districts bustling with office workers during the day can become desolate ghost towns at night. Al said designing mixed-use areas helps to minimize commuting times and to allow full utilization of land area. Limited single-use CBDdistricts are evident in London, Parisand other major world cities.

“But if we look at Hong Kong’s Central Business District, it’s a very special situation. It’s already mixed use. The downtown CBDhere-Hong Kong Central-it doesn’t just have office buildings. There are residential, other commercial uses, hotels. It’s always pretty vibrant,” he said.

Hong Kong’s hyper-density also creates characteristics unique among the world’s CBDs. Al cited the city’s elevated walkways, over which pedestrians can pass through air-conditioned malls, office towers and connected corridors at various tiered levels (while also avoiding exposure to sweltering summer days in Central District).

Elevated pedestrian walkways are outlined the CBD2, and Lam said Kowloon East is scheduled to absorb other elements of the traditional CBD, too. Eleven government departments would relocate to the region, freeing space for commercial use elsewhere.

In the context of Kowloon East, she explained CBD2 is also a new acronym for “Connectivity, Branding, Design and Diversity.”

Connectivity refers to a proposed $12 billion eco-friendly monorail and pedestrian bridges announced during the recent Policy Address. Lam said Branding refers to redefining the former-industrial area’s reputation for being “dull and remote”. Design refers to urban greening projects. Diversity refers to new waterfront activities, alfresco dining, tourist attractions and heritage conservation.

Not everyone is enthusiastic about the current plans for Kowloon East. Wallace Chang, associate professor of Architecture at ChineseUniversityof Hong Kong, has spent the past six years researching the “KaiTakRiver”, a former sewage canal emptying beside the old runway. He said the Kowloon East plan looks at progress from the wrong perspective.

“We call this ‘the Bay Area’,” he said, indicating the districts surrounding the old airport on a huge wall map. He spoke from within an old industrial space in Sam Po Kong; the factory flat was modified into an art and design studio called Culture Factory. Chang said the planned CBD2 seems to be a “branding exercise” that could pave over Kowloon East’s authentic identity.

“Personally I don’t think we need more commercial buildings even though the statistics say we’re lacking,” he said. “I think this is a fallacy, because the trend is that more than 30 percent of the working population works at home. Many people now don’t need offices, because all of our creativity is synergized through the Internet.

“If we go back in history, Hong Kongwas a fishing village. Can we create a new district-maybe not a CBD— that is related to water, beautiful and environmentally friendly?”

Almost all of the Bay Area is built on reclaimed land, Chang said — an origin shared with much of northern Hong KongIslandin the CBD, though the regions took distinctly different paths. Compacted skyscrapers in Central grew over colonial government facilities and trading company warehouses. The Bay Area developed much later as an industrial hub.

He said 13 villages once dotted the bay surrounding Kai Tak, which itself came into being as land reclaimed for a failed real estate scheme. The land eventually became an airport in 1925. Light industrial factories crowded adjacent districts beginning in the 60s. During the 90s, factories began cutting costs and relocated to the Mainland. In 1998, Hong Kong’s old international airport closed for good. Once-vibrant districts fell idle.

Chang supports adapting the old industrial buildings for new use. Musicians, artists and cultural organizations have increasingly taken advantage of the cheaper rents, and he speculated maybe Kowloon East could become a hub for green and creative industry.

The government added another three years to the application period for industrial revitalization. Tsang first introduced the initiative during his 2009-2010 Policy Address. This spurred 16 redevelopment projects in Kowloon East. Lam said fragmented ownership of factory buildings remains a persistent hurdle for redeveloping the region.

Scattered “early-mover” developments in the Kowloon East remain stranded within stretches of unconverted industrial blocks. The MegaBox shopping mall is one example. At night, the colossal cube glows blood red above dimly lit industrial streets.

Global real estate firm Jones Lang LaSalle had previously written a report on Kai Tak, and Deputy Managing Director Gavin Morgan said the company will revisit the subject as part of a larger report addressing plans for Kowloon East. He said the next paper would be completed by year end.

Morgan said he would like to see enterprise zones within Kowloon East — and also in the traditional CBD— providing incentives for construction and helping to facilitate the eastward progression of Hong Kong Island development. “That will continue to help ease the load as we move toward a new commercial landscape where Kowloon East is a major component,” he said.

Kowloon East’s geographic isolation could pose a problem for the success of the CBD2. Morgan said improved access to the traditional CBDand international airport on Lantau would be necessary. Architect Stefan Al voiced the same concern.

The Development Bureau declined to reveal a timetable or schedule for additional plans, designs or public consultations. A press liaison from the Development Bureau replied in an e-mail that the new Kowloon East Development Office would be established after applying for funding from the Legislative Council in 2012. The new office would “steer, supervise, oversee and monitor the revitalization of Kowloon East area with full engagement of the public and stakeholders”.

Change is coming, but the public will have to wait to hear the details.