Hong Kong Developers Look to Revitalise Old Buildings for Land

Hong Kong developers are increasingly revitalising old industrial and residential buildings as land for development in the city remains tight. 

Developers have been finding it difficult to acquire sites in the Hong Kong government land sale, but it is welcome news that the most commercial and residential land in decades will be released for sale in the 2019-20 Financial Year. 

"A red-hot government land sales market in 2017 and early 2018 and large plots on offer -- which translates into bigger lump-sum investments -- effectively shuts out a lot of small-to-medium sized developers," says Cathie Chung, senior director for research at JLL Hong Kong.

As announced in the 2018 Policy Address, the Hong Kong government has re-activated its ‘Revitalisation 2.0’ scheme for industrial buildings. It will relax the gross floor area plot ratio by up to 20 per cent, allowing owners to build at a higher density. The new scheme has also been expanded to allow the conversion of industrial buildings into transitional housing. 

Hong Kong’s Lands Tribunal received a total of 39 applications for compulsory sales in 2018, which allows developers to gain full control of a building after securing 80 per cent ownership. The number of compulsory sales in 2018 is at the highest in six years. 

Compulsory sales is a viable alternative source of land supply for developers to sustain their project development pipelines, Chung reiterates.

Not only do property developers stand to benefit. The government has announced that it will permit the use of buffer floors to be converted for data centres or telecommunications exchange centres so that the lower floors of industrial buildings can be used for non-industrial purposes.