Challenges loom in converting industrial buildings into homes

The government's latest plan to allow owners to convert their old private industrial buildings into homes is expected to give a further boost to the industrial property market, but estate agents believe it will only be possible to do a few conversions.

"The new policy is positive news for the market, which will stimulate both transaction volumes and prices, as owners are now given one more option to redevelop their buildings," said Raymond Chu Leung-hang, senior district director at commercial real estate agency Ricacorp (CIR) Properties.

Chief Secretary Carrie Lam Cheng Yuet-ngor said last week the government would relax building and town planning rules to make it possible to convert old private industrial buildings into "transitional accommodation" to help the housing supply. The dwellings, of about 300 square feet each, would be for rent and not for sale for at least 10 years.

There are more than 1,400 industrial buildings in Hong Kong and the changes will allow sites zoned as "other specified uses (business)", on which 700 industrial blocks now stand, to be converted for residential use.

"However, it will be difficult to convert these buildings into residential flats unless an industrial property belongs to one single owner," Ricacorp's Chu said.

Only about 10 per cent of the 700 blocks, or about 70 buildings, belonged to single owners, he said; and if the buildings had large floor areas - for example more than 10,000 sq ft per storey - conversions would be almost impossible because there would not be enough windows. However, despite these challenges, some owners of old industrial buildings had already begun expecting higher prices from buyers.

Prices of industrial properties had been rising steadily before the new policy was announced, and are up about 20 per cent on average so far this year. Prices of en-bloc consolidations have climbed even higher, by up to 30 per cent to 35 per cent.