Industrial buildings seen as a new source of residential land: JLL

A new pilot scheme is expected to attract investors looking to develop residential projects.

Industrial buildings that will likely be redeveloped, in line with a new government pilot scheme, will be a new source of land supply for residential properties in Hong Kong, real estate services firm JLL said.

The new land premium pilot scheme paves the way for owners of industrial properties built earlier than 1987 to pay a standard rate for lease modifications to facilitate building redevelopment.

The scheme is expected to attract developers to industrial buildings in particular, which could provide much-needed residential land supply in the urban areas.

“The new scheme is expected to trigger a significant number of cases of lease modification for residential development, as the lack of land supply problem has worsened, particularly in the urban area,” Norry Lee, Senior Director of Projects Strategy and Consultancy Department at JLL Hong Kong, said.

“We believe that acquiring industrial buildings with the potential of residential development will be a new source of generating residential development sites in the urban area for developers."

The standard rates vary across five regions in Hong Kong and the three types of usage in lease modifications for industrial buildings such as industrial of godown use before redevelopment, commercial or modern industrial, and residential use after redevelopment. The rates range from $20,000-$130,000 per square metre.

For his part, Nelson Wong, Head of Research at JLL in Greater China, said To Kwa Want, Yau Tong and Yuen Long are amongst the areas that will benefit from the pilot scheme.

"We expect To Kwa Wan, Yau Tong and Yuen Long will benefit from the scheme as a number of industrial building sites have been rezoned for Residential or Comprehensive Development Area (CDA) use, which have the flexibility to be redeveloped into a residential project,” he said.