Tse Wai-chuen says high premiums limit repurposing of old factory premises and calls for a more imaginative approach to making use of idle building space

Thanks to its favorable trade environment supported by a deep-sea harbor and free-trade policy, and to the sizable labor force formed to a large extent by mainland immigrants, Hong Kong saw such labor-intensive industries as textiles, clothing, toys, watches, electronics and plastic products flourish in the 1960s and 1970s. By the beginning of the 1980s, there were almost 1 million people in the manufacturing industry, accounting for 42 percent of the city's employed population, providing a solid income platform for many families.

However lower wages in the neighboring region and a lack of action by the government to promote development of new, high-value-added industries meant traditional industries, including processing industries, have gradually migrated north, leaving many industrial buildings vacant. The special administrative region government allows the transformation of some industrial sites and buildings for other uses such as housing and offices but the redevelopment and revitalization of industrial buildings has made little progress over the years because the government has relied excessively on market forces and provided insufficient incentive policies. With increasing vacancies resulting in lower rental and selling prices, these buildings have attracted many non-industrial users such as artists, designers and some innovative trades.

In 2009, the government became more proactive in increasing the supply of land for development. A series of industrial-building revitalization policies and measures were promulgated, giving concessions to owners, including exemptions from land premium for change of use. Achievements within those two or three years were in line with what had been done in the past two decades. In six years of implementation, many buildings have successfully transformed into hotels or office buildings and traditional industrial areas such as Kwun Tong, Wong Chuk Hang and Tsuen Wan gradually transformed into new business districts. However, concessions in land-premium charges for change of use have caused prices and rentals to rise significantly. The building owners eventually became the greatest beneficiaries. On the other hand, a lack of stringent controls over non-conforming uses in past years means these buildings served as useful niches for many tenants with limited resources, such as creative industries. Now they are forced to leave or close down because of rapidly rising rents, defeating the government's intention to support innovative and creative industries.

The upgrade of standards and facilities of many existing industrial buildings through rehabilitation was rather successful but total redevelopment of whole buildings was slow. This may be because the industrial building revitalization policy only exempts premium payment for rehabilitation projects but not for redevelopments. It is not uncommon to apply for government approval of redevelopment proposals but the land owners have to spend a lot of time and effort negotiating with the Lands Department over the high premium demanded. Besides, negotiations were protracted because of developers' lack of manpower. This has discouraged initiatives from owners to redevelop and indirectly reduced the supply of new floor space.

It is noted that the industrial building revitalization policy has received mixed responses since introduction because of uneven benefits to stakeholders. The government should perhaps consider exempting premium payment for changes of use of industrial building spaces as a whole to expedite transformation. Certainly, I am all for the principles of equity and would not advise any measures that mainly benefit the landowners. I would suggest the government could require the landowner concerned to lease part of the floor spaces after rehabilitation or redevelopment at a nominal rent to the government for 20 years in lieu of premium payment. The government could then rent out such floor space at an affordable rate to the trades or persons it wishes to support.

This is a win-win strategy since industries concerned would be relieved of excessively high rental burdens while the government could keep track of the proper and steady growth of emerging industries, as well as the timely introduction of appropriate controls and regulations including the upgrading of the required facilities so as to alleviate the potential safety risks such as the mishaps that have recently struck mini-storage facilities. I hope the government would consider these proposals favorably for improvements to industrial areas, land supply and the community at large.

(HK Edition 06/21/2017 page8)