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Ngau Tau Kok fire

Customers set to bear cost of upgrading Hong Kong mini-storage facilities in wake of deadly fire

Industry participants warn that rents could double once fire-safety measures are put in place under a new regulatory system

PUBLISHED : Sunday, 05 February, 2017, 4:58pm
UPDATED : Monday, 06 February, 2017, 4:51pm

Mini-storage operators warn that customers could bear the cost of an industry shake-up, as an impending regulatory clampdown by authorities coupled with escalating property prices pose challenges to the industry.

After a 108-hour inferno at an industrial building housing mini-storage facilities took the lives of two firemen last June, the Fire Services Department sought to strictly enforce international standards on fire safety. The government is also considering tabling legislation to set up a licensing system for the sector.

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Three operators and the leading industry body agreed that two things would happen after the changes – businesses would close and prices charged to customers would go up.

Prices of mini-storage units have risen an average of 10 to 20 per cent in the past five years because of higher property prices, inflation and wages, according to data from Store Friendly Self Storage Group, Hong Kong’s largest franchise that operates 100 stores across the city.

A 64 cubic foot storage space in Kwun Tong – roughly the size of an aircraft toilet – now costs HK$688 a month, up from HK$588 in 2013.

 

Tyrone Siu Man-chiu, who has rented a 25 sq ft space in Kwun Tong for more than two years for his collection of 600 photography books, said it was difficult to find cheaper solutions after his monthly bill rose 10 per cent in one year.

“I can still afford paying HK$575 a month right now, but if the price keeps on increasing at this pace, I’m pretty certain I won’t continue to rent,” Siu said.

“I might have to sell or donate some of the books and keep the rest at home,” he said.

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The storage industry, comprising some 885 facilities, has witnessed explosive, unregulated growth in the past two decades as smaller flats and unaffordable property prices have pushed residents to find an extension to their homes to store their possessions.

Although keen competition in the market has kept rents from rising too fast, prices could escalate when new regulations are in place, meaning operators would have to tear down structures and rebuild them to comply with fire safety standards.

Helen Ng, CEO of the Store House, a regional provider which also has facilities in Singapore and Malaysia, said customers could pay double the rent if a 2.4 metre corridor was required between storage zones, as the Fire Services Department has proposed.

“It’s a bit of a knee-jerk reaction by the authorities. No hotel even has a 2.4 metre corridor,” Ng said.

Oliver Leung Wing-hong, chief operation officer at premium provider RedBox Storage, estimated there would be a gradual 30 per cent increase in pricing, since alterations would mean losing out on leasable area.

One option of building firewalls around partitions to prevent the spread of blazes within the facility would cost up to HK$12 million and take 18 months to fully implement, he said.
“It’s easy to introduce regulations, but who’s going to [pay for the changes]?” Leung asked.

Another option for the company to survive would be to focus on a valet service, which would provide door-to-door pick up and delivery. The goods would be stored in individual boxes in a common storage area, instead of partitioned units, making it easier for operators to comply with fire safety requirements.

Store Friendly chairman Kevin Chan said: “The most important consideration is whether [regulations] will affect our customers. Where are they going to store their stuff if all operators have to make changes at the same time? We all want to achieve a win-win situation here.”

Since the fire, at least 40 operators in the city have shut down either because the cost of new installations would be too expensive or because industrial building landlords do not renew leases.

It will be the survival of the fittest. All the mom and pops that are just getting by will disappear
Association executive directior Luigi La Tona

In one case, a storage company went bust after spending US$3 million on state-of-the-art equipment at its 10,000 sq ft site in Tsuen Wan after its landlord told it storage facilities were not permitted in the land lease, according to Self Storage Association Asia executive director Luigi La Tona.

Such facilities are only allowed to operate if a land lease for an industrial building states that godown facilities are permitted.

But operators were optimistic on one front: that the need for extra storage space was not going to diminish. As developers race to produce ever smaller flats, the demand for space to store goods will continue to soar.

“If you live in a consumer city that just begs you to consume as much as you can, then you need somewhere to put the stuff,” La Tona said.

He said “safe and sustainable regulations” would pose “an opportunity for rebirth” for the industry.

“It will be the survival of the fittest. All the mom and pops that are just getting by will disappear. A hundred per cent. However, those that can afford to stay in the game will continue and they will have the potential to grow,” he said.