Occupancy rates fall at converted industrial buildings
Low ceiling, limited space prompts high-paying tenants to look for other alternatives
Developers who spent a fortune in converting their old industrial buildings into offices have been unable to draw in tenants in the highly competitive market, with some projects encountering high vacancy rates of 62 per cent.
Only a third, or 83 out of the 226 applications have actually been utilised for commercial redevelopment purposes after the Hong Kong government discontinued the six-year long industrial revitalisation scheme in March, according to international property consultant JLL.
The main purpose of the scheme was to reduce commercial property shortage in the city by facilitating the transformation of industrial buildings into offices, hotels and retail space.
Among the 58 cases that came up for office space development, JLL surveyed the performance of the 28 completely converted office projects.
Jacqueline Wong, associate director of valuation advisory services at JLL said the average occupancy rate of the 28 completed converted office buildings were 75 to 80 per cent, which is much lower than the overall office occupancy rate of 85.5 per cent in Kwun Tong, Hong Kong’s oldest industrial district. Wong said four buildings had occupancy rates of 38 per cent to 67 per cent, and three of these were in Kwun Tong.
“The failure to lease these buildings could be due to the quality of the product or the high rent or a combination of both,” she said.