Aging factories being re-made into gleaming offices

Redevelopers also set sights on beat-up warehouses.

Hong Kong redevelopers are turning more and more old factories and warehouses into offices to cope with the huge demand for office space in the city with the world’s second-highest rents.

Centaline Property Agency Ltd noted that Pamfleet Group and Gaw Capital Partners bought over US$7 billion of the city’s industrial properties in the year ended June 30. This was the highest for any 12-month period on record, said Centaline.

The makeovers of industrial properties will provide about 74,300 square meters of new office space in Hong Kong in 2013, said property advisors Colliers International. Redevelopers will add about 42,364 square meters of new space in 2014 excluding conversions.

Redevelopers have also set their sights on vacant industrial spaces and this trend has sped-up since has 2009. Analysts said redevelopers are seeking to exploit the gap between the cost of acquiring the buildings and the potential return from converting them for office spaces to be used by business firms.

The government has implemented policy changes since the 1980s to encourage the transformation of unused properties after manufacturing shifted to cheaper locations in mainland China and Southeast Asia.

Average prime office rents have risen 54% to June from mid-2009, said the government. Average vacancy rates fell to 6.1% in 2012 from 11.5% in 2009.