Lands office fast asleep amid misuse of industrial space

PUBLISHED : Wednesday, 20 February, 2008, 12:00am
UPDATED : Wednesday, 20 February, 2008, 12:00am

'That, as there is an increasing shortage of commercial land available for development and, at the same time, many old industrial areas in Hong Kong have a serious ageing problem and the situation of factory building units being left vacant, converted into warehouses or used for other non-industrial purposes is prevalent, the precious land resources are not fully utilised, this council urges the Government to take proactive measures to comprehensively re-plan the old industrial areas ...'

Legco motion

That bit about precious land resources not fully utilised certainly addresses the question. We still have 187 million square feet of flatted factory floor space in Hong Kong and it is, well, mature. We have long stopped building any and more than 80 per cent of the stock is in excess of 20 years old.

As far as industrial use is concerned, it is also moribund. What little industry we have left largely occupies another 77 million square feet of space designated for (1) private storage, (2) private specialised factories and (3) private industrial office.

Strange to say then that over the last four years the price of flatted factory space has shot up, rising threefold to about HK$2,400 a square foot for premises in New Kowloon. Why should people bid up antiquated floor space that is in huge oversupply and cannot even be put to its legal designated use?

Take note from the chart that although prices have been this high before, they were so in mid-1994, not mid-1997 as for the rest of the property market. The market for industrial floor space had already long fallen into a slump by 1997 and the industrial economy of Hong Kong has only declined further since that time.

The answer to this puzzle is also contained in the members' motion that the Legislative Council will debate today - 'converted into warehouses or used for other non-industrial purposes'.

What we have here is an instance of how the law can sometimes be defied universally. Only seven years ago, the Court of Final Appeal ruled in a landmark case, Raider vs. Secretary for Justice, that non-industrial businesses may not occupy industrial space. This ruling has now become a joke.

It's easy for the owners of industrial space to defy the law. They don't lease the space to their tenants as commercial space. The leases stipulate that the space can only be put to industrial uses.

But the law then says that landlords have no right to barge in on tenants, break their locks and inspect the property. If the tenants lied about the uses to which they put the property and these lies have not been drawn to the landlords' attention, then the landlords take the view that it is none of their business.

The tenants are also happy with the arrangement. They pay lower rents than they would if they occupied the property legally. This is not said or stated anywhere, certainly not in writing, but everyone knows.

If you wish to know it yourself, you need do no more than take a walk through any industrial area and see how many of these buildings are now fully occupied by shops and offices. Some even serve as homes. I haven't seen it myself, but friends tell me you can watch the school buses pulling up to some of these blocks in the morning and see the kids streaming out.

So, this Legco motion is not exactly on the button when it says that this space is not being put to good use. It is increasingly being put to very good use. This simply hasn't been officially recognised, that's all.

But it may still be better to recognise it officially. Aside from the problem of building codes that are not appropriate to the uses of these buildings, there are any number of good reasons in urban planning for the Lands Department to stop fooling itself about what has become absolute fact.

And, given that most of the illegal offices in this industrial space are sales offices for manufacturers on the mainland, why not make their occupancy legal and get the rents up to the market level for such premises rather than making a gift of rental discounts to people who have chosen to take their businesses out of Hong Kong?

Most of all, it does not bode well for the rule of law to encourage widespread defiance of the law, as we are now doing.

But I doubt that a Legco motion will have much effect. What we need is an alarm clock in the offices of the Lands Department, a loud one too. They're fast asleep there, have been for years.