DEVELOPERS seeking to redevelop old industrial properties for mixed usage find the prospect of composite industrial-office properties promising. Francis Li, director of C.Y. Leung & Co, said the shift of the Hong Kong economy to tertiary industry had fuelled the demand for industrial-office properties. He said many old industrial properties, usually poorly maintained, could not satisfy rising demand for good quality premises among industrialists and manufacturers. According to him, industrial and godown space accounts for 26 per cent of total private building stock in the territory, and 45 per cent of such space is more than 15 years old. He said there was tremendous potential for redevelopment of these old industrial properties into composite industrial-office premises. He said industrialists were willing to pay higher prices and rentals for space in new high-quality industrial buildings. Old poorly-maintained industrial buildings commanded low prices and rentals, he said. Mr Li said old industrial buildings with multiple owners and in good locations would be the target of redevelopers because fewer individually-owned properties were available. ''The huge price gap between new and old buildings will act as the biggest incentive for co-owners to [jointly] consider disposing of their respective floors, or units, as a redevelopment site,'' he said. In doing so, co-owners would obtain the highest value for the building, he said. Mr Li said many property developers had already invested in the development of quasi-office industrial properties in decentralised areas, especially along Mass Transit Railway and Kowloon-Canton Railway lines. High prices were paid for industrial properties with redevelopment potential for quasi-office use, he said. In the past year, he said his company had handled and arranged a number of transactions relating to industrial properties with redevelopment potential. The total value of these transactions amounted to about $4 billion, reflecting strong interest among developers and investors in the sector, he said. Large deals handled by the agent included the $1.03 billion sale of the Dairy Farm Building to Henderson Land Development, the $310 million sale of Kwong Sun Hong Godown (No 2) to Lai Sun Development and the $228 million sale of Edward Wong Industrial Centre to Sun Hung Kai Properties. Regulations do not restrict the size of an office to be established within an industrial-office building, as long as it is ancillary and directly related to an industrial operation. Mr Li said appreciating rentals for office space in core business districts, such as Central and Wan Chai, had forced some industrial companies to relocate their operations to decentralised office buildings, or quasi-office industrial buildings. IBM is considering moving out of its office in Exchange Square to an industrial-office building in Wan Chai. Mr Li said the supply of quasi-office industrial buildings would alleviate the strong demand for office space. He forecast the price of industrial properties would appreciate by 10 to 15 per cent this year, while rentals might go up between five and 10 per cent. Last year, it was estimated that the selling price of new industrial properties had increased by 30 to 40 per cent. Record prices of $3,200 and $5,000 per square foot for modern industrial spaces were achieved in Tsuen Wan and Kwun Tong, respectively, Mr Li said.
