Activated Industrial Building with Wang Quan Building
Revitalizing the Industrial Building Scheme 2.0: Accelerating the Reconstruction of Hong Kong Industrial Buildings”, pointing out that the government’s restart of the revitalized industrial building project will lead to the acquisition and sale of more old industrial buildings, making Hong Kong The industrial and logistics real estate investment market is more active.
Chen Jinping, head of CB Richard Ellis and Hong Kong Research Department, said: “The recent acquisition of old industrial buildings has recorded a significant increase in transactions, which is related to the fact that investors can get higher returns from remodeling and rebuilding industrial buildings. Trading activities in Kwun Tong, San Po Kong, Kwai Chung and Tsuen Wan, Cheung Sha Wan and Lai Chi Kiu and Wong Chuk Hang are particularly hot. Re-launching the revitalisation of the industrial building is a positive measure for investors and will further drive the old Industrial and commercial investment.”
Activation increases investment incentives
The high return that the revitalization of the industrial building can provide is a big incentive for investors. CB Richard Ellis Research found that the conversion of industrial buildings to office buildings, shops or hotels generally requires between $1200 and $2,500 per square foot. The actual price depends on the decoration and specifications. Industrial buildings converted to office or semi-shops can provide a rental premium of up to 60%.
Chen Jinping pointed out: “The activation of industrial buildings has a higher capital value than other industrial buildings. In the past, some conversion projects recorded a capital value increase of 44% to 149% during the investment period, which is much higher than that of general industrial buildings. The increase in the relevant capital expenditures, these investment projects can produce an average internal rate of return of 16%.”
The Revitalisation of the Industrial Building Scheme will allow the upgrading of eligible industrial estates to increase the plot ratio by up to 20%. This measure will bring important incentives for the redevelopment of industrial buildings and will lead to more industrial redevelopment projects, which will indirectly drive up the price of industrial buildings. The capital value of industrial buildings increased by 1.4 times in the first quarter of 2010 to the first quarter of 2016, when the revitalization plan was first introduced.
CB Richard Ellis and Hong Kong Managing Director Mr. Guo Fuli said: “CB Richard Ellis found that the acquisition of industrial buildings in 2017 and 2018 for reconstruction projects amounted to 24.5 billion yuan, accounting for two years of total investment in industrial buildings. 49%, much higher than the average of 18% recorded in the first five years of 2016. This shows that investors are eager to meet the needs of redevelopment of industrial buildings. In addition to the old industrial buildings, higher specifications for third-party logistics providers. Warehouse industrial buildings are also favored by investors. Industrial and logistics real estate properties are currently one of the most popular asset types in Hong Kong. We expect strong demand and low vacancy rate will drive the capital value of such properties to rise the most in 2019. 5%.”
Revitalization of the Industrial Building Scheme to Provide New Investment Incentives The Hong Kong Government first launched the Revitalising Industrial Building Scheme between 2010 and 2016 to encourage the conversion of the entire old industrial building and the redevelopment of the industrial building. In the policy address at the end of 2018, the government announced the restart of the activation of the industrial building plan.