Government will need to relieve supply stress

After announcing it'll discontinue the revitalization scheme.

The Hong Kong Government introduced the Industrial Revitalization Policy in April 2010 to fast-track the use of industrial space and regenerate ageing and deteriorating buildings.

According to a research note from CBRE, in light of shrinking vacancy levels in the industrial sector and growing demand for industrial space by various users, the government has decided to discontinue the scheme in March 2016.

Darren Benson, Executive Director, Industrial & Logistics, Brokerage Services, CBRE said, “The government has recognized the need for greater industrial supply. We believe that more industrial land will be released for sale by tender.

Here's more from CBRE:

With the growing demand for industrial space by more diversified users in the next few years, and the fact that the net stock change between 2015 - 2017 is expected to be negative, the government will need to relieve this stress on supply.”

Here are the revitalization scheme highlights to date: Of the 116 applications approved as of the end of October 2015, 74 were executed, involving 11.5 million sq. ft. of Gross Floor Area (GFA).

A total of 5.7 million sq. ft. GFA (37 buildings) of industrial space has been revitalized, with 3.3 million sq. ft. GFA (18 buildings and 1 site) in progress. Also, conversions for office use were most popular, followed by hotels, retail shops and data centers

Meanwhile, majority of projects are in Kwun Tong (34 projects), with half of these projects located on Hung To Road and Wai Yip Street. Investors are focused on relatively small industrial buildings.

Lastly, 95 en-bloc industrial buildings have been transacted for a combined value of HK$38 billion.