Lease Modification of Industrial Lots

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Lease Modification of Industrial Lots Ways to
Utilize Vacant Industrial Areas

• by Raymond Ho
• 03.05.2003

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Structure of Presentation

• Obsolescence of I area
• Existing Measures Undertaken
• Lease Modification
• Problems Facing and Solutions
• Feasibility of other uses
• Conclusion

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Obsolescence of I Area

• In 2001,
• -Drop in price and rent 13 and 9
• In 2002,
• - take-up of private flatted factories
  -447,000m²
• - Vacancy 10.9, 65 of which located in Tsuen
  Wan, Tuen Mun and Kwun Tong
• - By year 2016, estimated surplus 4.2 million
  m²

Utilize vacant I area ? Urgent!!
4
Existing Measures undertaken

• Planning Department -- change guidelines/rezone
• Considerations
• District planning intention
• Surrounding land uses
• Environmental and traffic conditions
• Community and infrastructure provision
• Redevelopment potential

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Changing of Col. 1/Col. 2 Uses

• I/O buildings
• Lease modification cases of I to I/O
• Ambiguous
• X Difficult to enforce in case of breaching
  lease conditions

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• Inclusion of I.T. /Telecommunication
• - TPB included in Col 1in 2001
• - Apply waiver

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Rezoning

• R(E) e.g. Yau Tong, Aberdeen
• Preferably at the fringe of I area
• Special design/environmental mitigation
• Concern marketability and suitability

X Interface problem, living conditions
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Rezoning

• CDA e.g. Ma Tau Kok, Tsuen Wan
• Cluster of obsolete buildings
• larger scale of redevelopment
• Flexibility and better planning

• X scattered obsolete I buildings and multiple
  ownership

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Rezoning

• OU(B) e.g. Kwun Tong, Aberdeen,Cheung Sha Wan
• TPB introduced in 2001
• Cluster of I/O buildings
• Convenient locations
• As a buffer zone

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OU(B)

• Planning Intention
• employment zone for clean industrial, general
  office and commercial uses.
• Flexibility
• Usually in Col.1 restaurant, retail,
  non-polluting industrial, office..

• Enhance conversion process
• ? non-stop valuation process!!

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Lease Modification

• I ? OU(B) uses
• User
• Industrial/godown purposes ?non-residential
  (excl. e.g. hotel, petrol filling station and
  residential care home)
• Valuation Concern

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Problems and Possible Solutions

• Current Government Land Premium Policy
• - Huge amount of land premium
• - Long negotiation process
• Encourage redevelopment by premium reduction?

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Real problems behind.

• Multiple ownership
• Financial viability

• Similar to urban decay
• Rezoning a good start but missed the economic
  booms in 90s

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Possible Solutions

• Standard rates
• increase transparency and certainty
• ? more incentives
• X Difficult to determine the rates
• Propose a broader base and review periodically

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Possible Solutions

• Pay by instalments
• Loan schemes
• Facilitators
• Government take-up

• X ineffective and money consuming
• ? Minimum government intervention

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Feasibility of other uses

• Hotel
• - Col. 2 in some places, e.g. Kwun Tong
• X secondary locations
• X expected completion 17,000 rooms in
  2003-2005
• ? potential problem of over-supply

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Feasibility of other uses

• loft concept/home-office
• - bad living conditions
• Vertical-mix multi-use towers
• - e.g. retail, parking, hotel, office,
  amenities, institution and entertainment
• Advantages
• Increasing revenue
• Better urban environment
• Integrating public uses

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Potential Problems

• Extreme compact
• Compatibility
• Infrastructural capacity
• Adequacy of community facilities
• Fire safety, hygiene.

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Conclusion

• Obsolescence of I area
• Multiple ownership and financial viability
• Minimum government intervention
• Ways to enhance conversion

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• END
• Thank you!