LCQ13: Leasing of public flatted factory buildings

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Following is a question by the Hon Sophie Leung Lau Yau-fun and a written reply by the Secretary for Housing, Mr Dominic Wong, at the Legislative Council today (Wednesday):

Question:

Regarding the leasing of public flatted factory buildings, will the Government inform this Council whether it knows:

(a) the gross floor areas and occupancy rates of these factory buildings respectively in each of the past three years;

(b) the major types of trades in which the tenants are engaged at present; and the number of enterprises among them with less than 50 employees each;

(c) the existing criteria for determining the level of rents of these factory buildings and the changes in rents per square metre in the past three years; and

(d) whether there were any cases in which the tenants terminated their tenancies due to rent increases in the past three years; if so, the percentage of such tenants who have terminated their tenancies in the total number of tenants?

Reply:

Madam President,

There are 15 public flatted factory estates. Their total internal floor area (IFA) and letting rates in the past three years are:

           Total IFA (m2)    Letting rate (%)
           -------------     ----------------
1996          422,824              91.13
1997          413,178              90.52
1998          404,214              90.90
(as at August)

All factory tenants must operate trades approved by the Housing Authority, and a large variety of trades is operated by these factories. The Housing Authority does not keep a record of the number of workers employed by each factory tenant. However, the trades permitted in these factories, together with the range of their sizes, suggest that the industrial activities are of a small scale.

There are two rental levels for the flatted factories. About 48 per cent of tenants, whose tenancies were acquired before September 1, 1974, are paying scheduled rents. Because of low initial rent levels, scheduled rents are still below market rents despite the increase of 25 per cent every two years since 1977. (A comparison is shown at Annex. The Annex will be faxed, separately)

The remaining 52 per cent of factory tenants pay market rents. Factors such as location, design, ceiling height and permitted floor loading are taken into account in determining rent levels. Rents are normally reviewed at three year intervals upon tenancy renewal. In line with rent re-assessment measures recently introduced by the Housing Authority for commercial premises, tenants with tenancies commencing or renewed between January 1, 1996 and January 31, 1998 may apply for re-assessment of rent payable from July 1, 1998 for the residual period of existing tenancies.

Since rents for flatted factories vary with a number of factors, it is difficult to provide details on changes in rents per square metre for all factories in the past three years. However, factories let at market rents have had their rents decreased upon tenancy renewal over the past three years, as follows:


                  Percentage of rent reduction
                  ----------------------------
1996                       0 to 10%
1997                       0 to 6.5%
1998 (up to August)        0 to 24%

     The number of tenants terminating their tenancies in
the past three years is as follows:

            No. of tenants      % of total number
        surrendering tenancies      of tenants
        ----------------------  -----------------
1996              628                8.8%
1997              387                5.5%
1998              325                4.7%
(up to August)

The Housing Authority has no knowledge of the reasons why tenants surrender tenancies. Since scheduled rents are low, and many tenants paying market rents have enjoyed rent reduction in the past three years, it is believed that few tenants surrender tenancies because of rent increases.

End/Wednesday, September 23,1998

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