Property analysts say the simplified standard waiver fees for converting under-used industrial premises into commercial properties are too high. Centaline Property Agency's project and investment general manager Nelson Szeto said the new rates of up to HK$260 per square foot set by the Lands Department for lifetime waivers in urban areas exceeded the level that the market would find acceptable. Charges for sites in the New Territories were more reasonable, he said. He expected the standardised rates would encourage more landlords in the New Territories, especially in Yuen Long, to convert their premises because office rentals there were much higher than those for industrial premises. Mr Szeto suggested the government reduce the administrative fees for the waiver applications as the simplified process would take less than two months compared with six to nine months previously. A reasonable administrative fee would be about HK$7,000, compared with HK$22,100 at present, he said. The government could also extend the deal to godowns in industrial areas, he said, since the building designs of some obsolete godowns were particularly suitable for private clubs or art studios where there was potential market demand. Under the new mechanism unveiled by the Lands Department recently, owners of existing industrial premises can pay a one-off rate for lifetime waivers, or an annual waiver fee for temporary lease modification to use the properties for other purposes that fall under two categories. In the first category, the use can vary from office operations to telecommunications and production studios, while in the second, the premises can be adapted for use as art studios, travel agencies or investment brokerages. Residential and hotel uses are excluded. Standard rates per annum range from HK$21.27 to HK$28.60 per square foot based on the internal floor area for properties in urban areas, and from HK$15.97 to HK$21.83 per square foot in the New Territories. The one-off rates for lifetime waivers range from HK$193 to HK$260 per square foot in urban areas and from HK$145 to HK$198 per square foot in the New Territories. Asia Pacific Properties associate director Macey Ho Mei-sze criticised the policy as being 'too late to cope with the rapid market changes'. She said sharp office rental declines in recent years had narrowed the price differential between decentralised offices and industrial premises. Excess office supply had narrowed the rental gap between offices and industrial premises to about HK$2 per square foot from HK$4 or more previously. She expected the new policy would make it easier for the government to enforce waiver charges on premises which were used illegally for commercial purposes rather than encourage owners to convert their industrial premises for commercial uses. Chesterton Petty director Charles Chan Chiu-kwok said the waiver fees were 'quite expensive', which could discourage owners from converting their industrial premises into commercial properties. This would be the case especially in areas where there was already an ample supply of offices, he said. The rental differential between offices and industrial premises in areas such as Kwun Tong, Cheung Sha Wan, Sha Tin and Yuen Long is significant but the gap is less apparent in districts such as Kowloon Bay, Tsuen Wan and Tuen Mun, according to Chesterton Petty. Office rentals in Kwun Tong ranged from HK$13 to HK$14 per square foot, while industrial premises were priced at between HK$6 and HK$10.40 per square foot, the agency said. In Cheung Sha Wan, offices fetch rents of between HK$9 and HK$12.20 per square foot, and rents for industrial premises range from HK$3.50 to HK$7.50. Offices in Sha Tin fetch rents of between HK$12 and HK$15 per square foot, while rents for industrial premises range from HK$4.50 to HK$9.70. In Yuen Long, office rents are between HK$8.10 and HK$17.90 per square foot, and industrial premises fetch rents of HK$1.20 to HK$5.30 per square foot. The rental differential, which reflected supply and demand, would encourage owners to pay waivers to convert the use of their premises, as the value of their properties would increase, Mr Chan said. However, the rental gap between offices and industrial premises in other areas is much narrower. In Kowloon Bay, offices fetch rents of between HK$6 and HK$10 per square foot, while rents for industrial premises range from HK$2.50 to HK$9.60, according to Chesterton Petty. Rentals for offices in Tsuen Wan range from HK$6.50 to HK$14.50 per square foot and those for industrial premises range from HK$2.20 to HK$8.70. Office rentals in Tuen Mun range from HK$3.50 to HK$5 per square foot, while industrial rentals are between HK$1.20 and HK$5.20. Mr Chan said that although the new policy would not boost demand for offices, it provided the flexibility to convert industrial premises into a wide range of facilities. He said take up of the waiver would inevitably increase office supply but downward pressure on rentals would be mild since the market response for the waiver mechanism would not be keen. Wharf (Holdings) assistant director Ricky Wong Kwong-yiu said the waivers were reasonable given that the rates were based on the internal floor area. It would mean a lower value on average, based on the calculation of gross floor area, which was the most common measure in the property market, he said. 'Users will eventually determine whether the charges are reasonable. They can simply rent offices in the vicinity within business zones if they find the waiver fees are too high,' Mr Wong said. Wharf has no intention of converting any industrial premises for commercial use under the waiver mechanism as most of its industrial sites are already allocated for redevelopment, which will involve individual land premium assessment for lease modifications. Mr Wong said relaxing the rules on industrial premises might lift demand for convertible properties and therefore boost occupancy rates of such buildings. A Lands Department spokesman said the waivers and the administrative fees would be reviewed from time to time in view of market changes. He expected the standard waivers would be mostly applied in former industrial areas rezoned for other uses, since the applications should also comply with existing planning regulations. The Planning Department has recommended the rezoning of about 150 hectares, or 43 per cent of the total 350 hectares of industrial land in metro areas, covering Hong Kong Island, Kowloon, Tsuen Wan, Kwai Chung and Tsing Yi, for business use under the Metroplan review. The new business zones will accommodate a wide range commercial interests. The spokesman said owners of obsolete godowns which fell within the business zones in the metro areas, as well as other industrial areas in the New Territories, were also welcome to proceed with their applications.