Policy Analysis on Industrial Building Revitalization

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Policy Analysis on Industrial Building Revitalization

1.Background

In the past few decades, Hong Kong has undergone economic transformation from secondary industry to tertiary service. Due to the northern movement of the manufacturers and industrialists for the relocation of production activities, the demand of industrial buildings has declined. The surplus factory buildings have become unoccupied and so their market values have remained low when compared with other property sectors. With reference to the Property Review (2010) published by the Rating and Valuation Department, the vacancy rate of flatted factories reached 8% (1,388,000sq.m floor area) of the total stock. In particular in Kwun Tong, Tsuen Wan and Kwai Tsing, nearly 56% of the factory space was vacant.

In recent years, public controversy concerning the revitalization strategy of the industrial buildings has been raised, focusing on the social, economical and environmental aspects.

In the political context, the government has introduced ‘Residential (Group E)’ and ‘OU (Business)’ zones on the statutory plans, allowing the flexibility in permitted change of the usage of industrial buildings. The constant amendment of Outline Zoning Plan has caused numerous industrial buildings located within the non-industrial zones, encouraging the restructuring of industrial buildings through lease modification. It speeds up the pace of urban renewal. In the economical view, the obsolete factory buildings in urban areas have caused reduction in land value, wastage of precious land resources and expenses of heavy maintenance cost. Last but not the least, concerning the environmental issues, the old dilapidated industrial buildings scattered around metro areas have lead to unfavorable hygienic condition and undesirable environmental pollution, causing disturbance to the residents nearby.

2.Relevant Government Policies

The Hong Kong government has launched four measures to optimize the use of industrial buildings – redevelopment by resumption or lease modification, “Pay What You Build” approach and wholesale conversion. The first three measures facilitate the demolition and redevelopment paces of the industrial buildings. However, the owners are required to pay expensive premium under these three measures. Moreover, some existing industrial buildings still contain tangible and intangible values and are available for sustainable changes, which are ignored under this policy. Besides that, the demolition process intensifies the environmental pollution and resources wastage.

The forth measure is proposed to encourage the factory owners to transform the old and under-utilized industrial buildings to other higher value-added uses through relaxation of relevant regulations and restrictions. This policy aims to meet the social and economic needs and increases land supply for promotion of six industries through upgrading of industrial premises. Under this scheme, the building owners can apply for special waiver to convert the eligible buildings from industrial to commercial at nil premiums.

However, will these measures really help the government to achieve its goal? By January 2012, almost two years after the policy ‘Revitalization of industrial buildings’ came into effect, Lands Department only received 68 applications-56 for wholesale conversion and 12 for redevelopment. With an estimated 1,000 industrial buildings eligible under this scheme, the numbers are far from satisfactory. Then, what caused this policy goal more difficult to achieve than anticipated by the government?

3.Hurdles or Opportunities?

Attractiveness of the policy
Under this policy, the owners of eligible industrial buildings found that they are restricted by certain prevailing regulations, codes and practice notes when they want to restructuret the existing industrial buildings. In spite of exemption of conversion premium, the certain planning constrains and technical problems...
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