Analysts and market observers have come up with several explanations and even conspiracy theories as to why the sale of a prime commercial plot on Kai Tak's runway failed to take off.
All nine tenders for the commercial plot on the former airport's runway were rejected by the Lands Department ahead of the Lunar New Year, which came as a shock to the market.
Barely two years ago, in May 2017, Nan Fung Development won the bid for a commercial site in Kai Tak and paid a historic high price of HK$24.6 billion for the non-residential plot of land at a premium of about HK$13,000 per square foot.
It is hard to believe that another valuable commercial plot failed to sell just a year-and-a-half on.
Similar to the last commercial plot, the unsuccessful New Kowloon Inland Lot No. 6547 was designated to be used for the development of office buildings, hotels and retail shops.
Market analysts have since come up with several reasons for the failed sale, among them being:
1) Developers prefer residential sites in Kai Tak as a number of government sites and private units around the area have changed hands at good prices. Meanwhile, China's HNA Group has reportedly agreed to sell the last of its four land parcels in Kai Tak to Wheelock and Company for HK$3.9 billion.
2) Rent prices are under pressure due to a glut in office buildings in Kowloon East.
3) It's difficult for developers to foresee prospects for the hotel industry, which is not as good as the office building business.
4) Developers were not that interested in bidding as they are biding their time for the government to change the lot's designated purpose into a residential site.
The four explanations are not entirely contradictory but the last sounds more like a conspiracy theory, for if one looks at land sale records, unless there is a very significant change in the market, it is almost impossible to change the land purpose of a lot.
The government continues to promote the conversion of Kowloon East into a second core business district.
However, the number of completed A-grade office buildings in Hong Kong is expected to surge by 40 percent this year and Kowloon East, which is one of the core supply areas, is finding this supply hard to digest.
Developers are bearish about the market for commercial buildings and this has affected any intentions of expanding their office building business.
With the exception of Central, prices for commercial building in all other districts have peaked over the last year.
Eyebrows were raised when CK Asset (1113) announced the sale of its landmark office tower - The Center in Central - for a record HK$40.2 billion in November 2017, and the consortium which bought the property has now reportedly offloaded it at a lower price.
Meanwhile, the government has been criticized following its failure to sell the commercial plot.
Critics say the government was blind to market changes and refused to budge on its policy of high prices for land.
I remember that there was much talk among developers after Nan Fung forked out the sky-high sum for the Kai Tak site in 2017.
It is possible that Nan Feng's tender and prices for this bid were far above the second highest bid.
So if the Lands Department took the previous tender price as a reference point, it would most likely have rejected all the bids this time.
The failed bids also reflect that the government goal of increasing land supply is incongruous with the Lands Department's actions.
The last point is hotel sites. Though 65 million tourists flooded Hong Kong last year - a new record - the number of visitors who stayed overnight declined.
The new high-speed rail to the mainland and Hong Kong-Zhuhai-Macau Bridge no doubt propelled visitor arrivals but they have not done much to boost hotel occupancy rates.
What's more, developers are very cautious about the hotel business which has a long payback period for the capital invested, while residential projects in general are more profitable.
Ivan Tong is Editor in Chief of The Standard.