New industrial estates crucial for Hong Kong’s innovation goals

City officials should consider allocating more industrial land to private developers

PUBLISHED : Tuesday, 10 January, 2017, 4:55pm
UPDATED : Tuesday, 10 January, 2017, 7:23pm

In the Chief Executive’s last policy address, the Hong Kong government committed itself to promoting innovation and technology, triggering a public debate about how the city could ‘reindustrialise’ to achieve this goal.

The Hong Kong government unveiled plans to invest over HK$18 billion in a number of measures to support local innovation, including an expansion of the Hong Kong Science Park, as well as building advanced manufacturing centres and data centres in Tseung Kwan O.

Hong Kong’s manufacturing sector and light industries reached their zenith during the 1970s and 1980s. With production lines gradually moving north of the border during the 1990s, the city consolidated its status as a financial centre and transitioned to a service economy.

However, in recent years, production costs in China have soared, prompting some Hong Kong-based manufacturing firms to rethink their strategies.

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Some have opted to relocate their core functions and high value-added processes back to Hong Kong and rebuild the “Made in Hong Kong” model. However, since the Hong Kong government set up “Other Use (Business)” zones in 2001, nearly 300 hectares of land zoned for industrial use has been rezoned for commercial use. With industrial land in shorter supply, rents have increased – a factor that has today become the biggest single obstacle to Hong Kong manufacturing companies bringing their production back to the city.

At the same time, the government implemented a revitalisation scheme for industrial buildings in 2010. Under the scheme, owners of industrial buildings over 15 years old could opt to redesignate the buildings for other uses without having to pay any significant fees. Coupled with the government’s policy focus on increasing the supply of residential land, it is easy to understand why only a limited supply of new industrial land has been made available for tender. To promote reindustrialisation, the serious shortage of industrial land must be addressed.

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Ironically, Hong Kong’s firmly entrenched position as a financial centre has meant that the purposes for which industrial land is used today are much more diverse. According to the Planning Department’s 2015 statistics, the main uses of existing industrial buildings are warehousing and storage (including commercial mini-storage) and other non-industrial uses, such as offices, after sales maintenance services, showrooms, medical research and development centres and data centres.

Most of these old industrial estates were built for traditional manufacturers, and their actual plot ratios are relatively low. In order to reindustrialise in a way that is suited to high-tech innovation, re-planning of industrial land and related facilities is needed.

Building new estates that cater to the needs of target tenants, who may need to carry out advanced, high-precision production, is essential. This has implications for a host of land-related considerations, including power supply, floor height, floor-load capacity and ventilation systems. The advanced manufacturing centre under construction in Tseung Kwan O Industrial Estate is an example of an innovation-friendly project. Multi-floor designs would also create more floor space where land supply is limited.

To encourage the development of such new industrial estates, the government should consider allocating more industrial land to private developers. Leveraging private sector resources and taking a proactive approach to the problem of industrial land shortage will be a vital part of helping Hong Kong reindustrialise.

Samuel Lai is senior director, advisory & transaction for industrial & logistics services at CBRE