The government has pledged to revitalize our beleaguered industrial buildings, but will development measures help or hinder the communities that currently use them? By June Ng


To an outsider, Hong Kong’s industrial areas may appear gloomy and dilapidated. The once thriving industrial districts of Fo Tan, Kwun Tong and San Po Kong stand quiet, the businesses that once operated there having closed up shop and crossed over to the mainland long ago. But with their cheap rents and large spaces, many of these old factories have been transformed into art and music studios by local musicians, artists and creative entrepreneurs looking for room to create.

As the law currently stands, industrial spaces such as these are to be used as “production spaces” only, and anyone using them for any other purpose is technically breaking the law. However—recognizing that these half-empty buildings are not being used to their full potential—the chief executive announced in his latest policy address that the government would provide support and land resources to other sectors by freeing up some 1,300 industrial blocks for use in six key industries, including education, services, testing and certification services, environmental industries, innovation and technology, and cultural and creative industries. Interest in the proposal has been so high that property agency Midland IC&I reported a huge jump in the once-stagnant industrial property market, with 27 entire blocks sold this year, with 477 transactions on industrial properties 30 days following the policy address.

So far, so good it seems for these emerging industries, but these measures that enable factory space owners to redevelop their properties for other uses may actually be harming otherwise thriving art communities taking residence in these spaces. According to the government’s four measures to encourage redevelopment (see box), these buildings may very well be converted into hotels or malls, and rent is almost certain to increase sharply, as long-term occupants start to battle with increasing numbers of potential tenants flooding the market.

Horace Tse, managing director of Loft Stage, an 18,000 square foot rehearsal venue in San Po Kong that is regularly rented out by theater groups for rehearsal and performances worries that the proposal will turn into another LinkREIT incident—referring to a controversy where Link Mangement Limited, which owns all the malls in public estates in Hong Kong, raised rents drastically after rennovating their shopping centers. “We’re small business owners, and once the rent goes up, we will be kicked out,” he laments. This is a legitimate concern for many making their livelihoods around these areas. “The Factory” in Wong Chuk Hang is the city’s first revitalized industrial building, which opened as a boutique industrial space long before the government initiatives were announced. Sure, it’s nicely done up (see picture, above) but with an asking rent of $31,600 (including management fees) per month for a 2,000 square foot space, it’s a price that no struggling artist could ever hope to afford. The average rent for other industrial buildings is half that, at around $5 per square foot.

Another concerned industrial space inhabitant is Chan Kin-chuen, chairman of the Hong Kong Sky Kite Association. He purchased a studio space in Fo Tan some years ago in order to make kites and run his advertising business. As an owner, he should have less to worry about, but with the government’s new redevelopment-motivated policies, he may be at risk of being forced out of his beloved studio. Yuen Chi-yan from Community Cultural Concern says, “If owners want to demolish the building in order to build something else, they only need the agreement of 80 percent of the owners to make the sale compulsory; but for owners who want to carry out a conversion instead, they need 100 percent agreement from all owners.” In the light of this information, one can’t help but wonder whether it’s the emerging industries or the would-be property developers that are benefiting most from the scene.

But Peter Wong, executive director of pro-free market think tank Lion Rock Institute, disagrees. He believes that it is too early to say whether the rent will be increased as a result of this development drive, because more renovated buildings mean more competition in the revitalized factory space market, leading to possible price drops. “If the building has nicer décor and facilities, it might help boost creativity,” he says, “and however you look at it, it can only be a good thing that the government is legalizing the once-prohibited practices of using industrial spaces, and that soon, they can be enjoyed by all.”

Legislator Tanya Chan shares the same views as Wong, in the sense that she agrees it’s better for the arts scene to access these spaces legally, yet she is skeptical about the future of industrial studios. She predicts that rents will be increased in revitalized buildings in order to cover renovation costs and some buildings will be demolished. “Affected artists will have to search for a new location,” she says. However, because not all buildings have sole owners, Chan remains hopeful that there will still be clusters of multiple-owner buildings to house them. “The government needs us local artists to sustain the future West Kowloon Cultural District,” says Horace Tse. “We don’t want marble floors; we only need cheap rent.” He suggests that the government could offer incentives to arts groups or their tenders, such as subsidies on rents, to secure their futures and save them from eviction. Let’s hope the budding art communities that have flourished in our all but abandoned factories will be here for some time.

Thinking of Buying an Industrial Building?

The four new measures unveiled by the government to encourage use of old industrial sites explained.

 
1.    If an industrial building is over 30 years old, only 80 percent of the owners need to agree to sell it before it can be put on the market (previously, it was 90 percent).

2.    In a new “pay what you build” approach, owners will only need to pay additional premiums based on the actual development density after redevelopment (normally, buyers must pay additional premiums based on the potential value of the land).

3.     If the additional premiums exceed $20 million, owners can pay it in installments over five years at a fixed
interest rate.

4.    If an owner wants to change the land use from an industrial site to anything else, he or she no longer needs to pay a waiver fee if the building is at least 15 years old and they have already obtained planning permission.