Investors, developers eye Hong Kong industrial buildings built before 1987 after city relaxes conversion policy
- Lawsgroup’s Maxwell Industrial Building expected to be the first such project, could be worth HK$5.4 billion
- Prices for industrial spaces in Kwun Tong have risen by 10 per cent, number of transactions have jumped 50 per cent in first two months of 2019
Property owners, investors and developers are taking advantage of a recent policy relaxation by the Hong Kong government, which seeks to encourage the conversion of old industrial buildings for commercial purposes, to generate higher rents and resale prices.
Hong Kong textiles company Lawsgroup, for instance, last week began demolition at Maxwell Industrial Building, a property it owns in Kwun Tong, after receiving approval from the city’s Town Planning Board last month. It acquired the property for about HK$1.4 billion (US$178 million) in 2017 and will redevelop it into a 33-storey office building for leasing, according to chief executive Bosco Law Ching-kit.
The redevelopment of Maxwell Industrial Building is expected to be the first such project after the policy change, which was announced by Chief Executive Carrie Lam Cheng Yuet-ngor in October last year. Its new direction is aimed at increasing land supply in Hong Kong.
A revitalisation plan for industrial buildings was first announced in October 2009 by the government. It allowed changes in their use for office, retail or hotel purposes but was stopped in 2016. The new scheme has been expanded and allows for an extra 20 per cent in gross floor area during the conversion of whole industrial buildings built before 1987 for commercial purposes outside residential areas.
The Maxwell project is expected to be completed in 2022. Under the new policy, Lawsgroup will also gain additional floor area of 40,000 sq ft, for a total of 270,000 sq ft, after paying a premium for conversion of land use. Law said the company did not yet know how much it would pay as premium.
Can widespread industrial building conversions fill Hong Kong’s housing shortfall?
“We bought the building in 2017 due to its location in Kwun Tong, which is going to be a new commercial centre under the government’s plan to turn the old industrial district into a new business district. The 20 per cent extra floor area is a surprise bonus,” he said.