For Meeting on 30 November 2013 Paper Ref: CSD/3/2013

Commission on Strategic Development

Land Utilisation and Land Supply to Support the Economic Development of

Purpose

This paper briefs the Commission on Strategic Development on the Government’s strategy on and initiatives for land supply and utilisation to support the sustained economic development of Hong Kong.

Land Utilisation in Hong Kong

2. Hong Kong has a land mass of about 1 108 sq. km, with about 24% (i.e. about 265 sq. km) being built-up areas currently. There remain about 843 sq. km, or 76% of the total land area, of non-built-up land that scatter across the territory and are mainly woodland, grassland, wetland, barren land, water bodies and agriculture land, etc. They include areas considered unsuitable for development, such as country parks and special areas which occupy about 442 sq. km; “Conservation Areas”, “Coastal Protection Areas” and “Sites of Special Scientific Interest” covering some 70 sq. km; and remote areas, islands and steep slopes.

3. Among the remaining non-built-up areas, the gentler sites are mostly occupied by different uses and facilities, such as agricultural activities, village housing, workshops, port back-up and open storage facilities, etc. When developing such land, clearance, land resumption and compensation will be required, and the local employment and economy will be affected to a certain extent. Comprehensive planning and engineering studies with public engagement are prerequisites for ascertaining the sites’ development feasibility and the supporting infrastructures required.

Trend of Economic Land Uses

4. In his 2013 Policy Address, the Chief Executive said that sustained economic growth is prerequisite for us to tackle housing, poverty, ageing

- 1 - population, and environmental problems. One way to facilitate the further development of Hong Kong’s diversified economic activities is through the continued provision of suitable land and floor space. Over the past two decades, the supply of and demand for land and floor space for different sectors and industries have mostly been on the rising trend along with the sustained economic growth of Hong Kong. The following are some examples.

Offices, Commercial Space and Hotels

5. Hong Kong’s economy has been on a general growing trend over the past two decades, despite some cyclical downturns after the Asian Financial Crisis in 1997 and the Global Financial Tsunami in 2008-2009. Between 1992 and 2012, the Gross Domestic Product (GDP) of Hong Kong had increased by a total of 108% in real terms, equivalent to an average annual growth of 3.7%. There has also been a further development of Hong Kong towards a services-oriented economy, with the contribution of the service sector to our GDP rising from around 80% in 1992 to 93% in 2011.

6. During the same period, the total private office stock1 had increased by about 79%. Grade A offices also proliferated outside the traditional Central Business District (CBD) areas. Kwun Tung contributed only 1.4% of territory-wide Grade A offices back in 1992, and this had risen to 15.8% in 2012. At the same time, the vacancy rate of private offices, after soaring to a high level of 14% in 2003, had been on a steady decreasing trend and reached a low of 6% in 2012.

7. Meanwhile, the private commercial stock (retail included) 2 had increased by about 41% over the past two decades. Like private offices, after

1 According to the Rating and Valuation Department (RVD), private office premises comprise premises situated in buildings designed for commercial/business purposes, but exclude the non-domestic floors in the composite buildings. The presentation here includes Grade A, Grade B and Grade C private offices.

2 Private commercial premises include retail premises and other premises designed or adapted for commercial use, with the exception of purpose-built offices. However, it is noteworthy that the commercial premises owned by The Link Real Estate Investment Trust (The Link REIT) had been included in RVD’s statistics starting from 2006. According to RVD, The Link REIT owned about 726,000m2 of rateable commercial stock as at 1 August 2006.

- 2 - seeing the highest level of 10.8% in both 2003 and 2004, the vacancy rate of private commercial stock had turned downwards and reached just 6.9% in 2012. On the other hand, the number of hotels and hotel rooms in Hong Kong had increased by about 178% and 109% respectively from 1992 to 20123, with the occupancy rate rising to the highest of 89% in 2012.

Industrial Floor Space

8. The private flatted factories4 stock had decreased by about 2.7% between 1992 and 2012. Nevertheless, the vacancy rate of private flatted factories had lowered from about 10.6% in 2003 to a low of 5% in 2012. On the contrary, the private storage stock5 had increased by about 9.5% during the same period. Its vacancy rate had ranged from 2.8% to 12.3% between 1992 and 2012.

Strategy on and Initiatives for Land Supply

9. To meet the growing housing and other development needs of the Hong Kong community, the Chief Executive gave a clear account of the overall policy blueprint of the current-term Government on increasing land supply in his inaugural Policy Address in 2013. The Policy Address clearly set out the guiding principle of facilitating social and economic developments, and the vision of improving the living space of the people of Hong Kong through increasing land supply. The Government will continue to adopt a multi-pronged strategy to increase land supply in the short, medium and long term, through the continued and systematic implementation of a series of measures, including the optimal use of developed land as far as practicable and creating new land for development.

3 The relevant figures up to 1997 covered the previous Hong Kong Tourist Association Member Hotels only.

4 Private flatted factories comprise premises designed for general manufacturing processes and uses, including offices, directly related to such processes, and normally intended for sale or letting by the developers. The slight reduction in the total stock of private flatted factories from 1993 to 2012 might be partly due to the “revitalization of industrial buildings” measures introduced in October 2009, and the increasing number of planning cases for converting industrial sites to non-industrial uses.

5 Private storage premises comprise premises designed or adapted for use as godowns or cold stores and include ancillary offices. Premises located within container terminals are also included.

- 3 -

10. One feasible option is to increase the development density or optimising the use of the built-up areas, taking into account planning considerations such as traffic and infrastructure capacities, as well as the environmental, visual and air ventilation impacts. We have been carrying out on-going land use reviews, including: a review of vacant government sites, or those currently under short term tenancies or other government uses; and also two stages of review of “Green Belt” (GB) sites6, with the first-stage focusing on deserted, devegetated or formed GB sites, and in the next stage we are looking at lower-value GB sites at the fringe of urban and new town areas. These reviews have started to bear fruits, e.g. the first-stage GB site review produced some 57 hectares (ha) of land for rezoning to residential purpose. The Government will proceed with the town planning and other relevant procedures to convert the suitable ones to residential and other uses once the feasibility of developing these sites is confirmed.

11. Another option is to develop the gentler non-built-up areas, which are mostly in the rural areas and often consisting of “brownfield sites”, private agricultural land, village housing, squatters, etc. As mentioned above, we have to carry out comprehensive planning and engineering studies to develop such land. Our on-going efforts include the North East New Territories New Development Areas (NDAs), the Hung Shui Kiu NDA and New Territories North studies, etc.

12. A comprehensive account of the Government’s initiatives to increase land supply is at Annex for Members’ reference.

Increase in Supply of Land for Commercial Uses

13. We can see from paragraphs 5 to 7 above that we need a steady supply of commercial floor space to meet the growing need arising from economic development. Our multi-pronged approach also covers supplying more commercial land and facilities so as to facilitate the further development of different economic activities in Hong Kong. In 2011-12 and 2012-13, the

6 GB zones are mainly areas between development and mountains. Such sites vary in location and state, ranging from ones devegetated and those with some vegetation but right next to existing developments, to densely vegetated areas serving as buffers for country parks or conservation areas.

- 4 - Government sold a total of nine commercial/business sites, providing about 400 000 sq. m. of gross floor area (GFA). In the first three quarters of 2013-14, the Government has sold/will put up for sale three commercial/business sites, which are capable of providing about 130 000 sq. m. of GFA. Apart from continuing to take the initiative in land sale to increase the supply of commercial/business sites, the Government is actively implementing a series of measures with a view to further increasing the supply of commercial land and facilities. Some examples include –

(i) CBD - Conversion of existing government office buildings and suitable “Government, Institution or Community” (G/IC) sites for commercial use

14. It is the Government’s policy to relocate government offices with no location requirements out of high value areas, including the CBD areas, and to reprovision those accommodated in leased premises to government-owned premises as circumstances permit, so as to help increase the supply of offices in the market. Recent projects include disposing of the Government’s property consisting of a portion of 3rd floor and the whole of 4th, 5th and 6th floors of the Citibank Tower at 3 Garden Road, Hong Kong. Projects in the coming years include relocation of the Trade and Industry Department Tower in Mong Kok, relocation of the leased offices of the Department of Justice to the Ex-Central Government Offices, and phased relocation of offices in the three government office buildings at the Wan Chai Waterfront. The above projects are anticipated to provide a total of about 199 500 sq. m. additional office floor space.

15. Furthermore, the Government plans to convert suitable G/IC sites in the existing CBD areas, including the Murray Road Car Park in Central and the Rumsey Street Car Park in Sheung Wan, for commercial uses. These two sites are estimated to provide about 76 000 sq. m. GFA for commercial uses.

(ii) CBD2 - Energizing Kowloon East (anticipated to provide an additional office floor area of about 4 million sq. m.)

16. Kowloon East, which will become another CBD in Hong Kong, has the potential to supply an additional office floor area of 4 million sq. m. To expedite the process, we are considering relocating the existing government facilities in the two action areas of Kowloon East, and making available some vacant and appropriate sites in the action areas to the market as soon as possible.

- 5 - It is expected that these two action areas will be able to provide about 500 000 sq. m. of floor area in total for office and other uses.

(iii) Revitalising Industrial Buildings

17. The Government announced in October 2009 a set of measures to facilitate the redevelopment and wholesale conversion of old industrial buildings. These measures came into effect on 1 April 2010, aiming at providing more floor space for suitable uses to meet Hong Kong’s changing social and economic needs. Up to end October 2013, the Lands Department had approved 82 applications under the measures, and the projects concerned have a capacity to provide a total of about 886 000 sq. m. of converted or new floor space for non-industrial uses.

Sectoral/Industry-specific Land Utilisation and Supply

18. Different industries and sectors have at times raised concerns about the lack of suitable and affordable land and floor space. As mentioned above, developable land of Hong Kong is limited. Putting our scarce land resources to optimal use is undeniably a must, if we wish to meet the continued development needs of the various sectors and industries as far as practicable. Hence, the Government has been taking forward a series of initiatives to address the land demand of specific sectors/industries.

(i) “Hotel Only” Scheme

19. We have been implementing the “hotel only” scheme since 2008 to assist the tourism industry in promoting its sustainable development and catering for the demand for hotel rooms resulting from the growth of tourists. Apart from hotel sites included in the Land Sale Programme (LSP), the scheme is also applicable to lease modification and land exchange applications opting for “hotel only” development. Under the scheme, the reserve price for “hotel only” sites included in LSP and the premium for lease modification and land exchange cases opting for “hotel only” development will be assessed on a “hotel only” basis instead of their maximum permissible development potential.

20. Since the launch of the “hotel only” scheme, the Government has sold five sites in Sai Kung, Queen’s Road East, Hung Hom Bay reclamation area, the western part of ex-North Point Estate and Central (Murray Building)

- 6 - respectively, capable of providing about 2 330 hotel rooms altogether. Furthermore, hotel development must be included in another site for mixed residential and commercial uses sold in 2011 (Oil Street in North Point), capable of providing about 370 hotel rooms.

21. As at October 2013, there were a total of four cases of lease modification/land exchange opting for “hotel only” development, estimated to be capable of providing about 1 550 hotel rooms. All the aforementioned hotel developments are estimated to be capable of providing about 4 250 hotel rooms in total.

(ii) Data Centre

22. The Commerce and Economic Development Bureau announced in June 2012 the implementation of two measures to facilitate the development of data centre, viz. to exempt the waiver fee for changing parts of the existing industrial buildings into data centre use; and for the development of high-tier data centres involving lease modification of industrial lots, to assess the modification premium on the basis of high-tier data centre use. Apart from these two measures, the Government will continue to identify suitable sites for the development of data centres. 2 ha of land in Tseung Kwan O have also been set aside for the development of high-tier data centres, of which the first site of about 1 ha was made available for open bidding in June 2013.

(iii) Recycling Industry

23. The Government has set up the Steering Committee to Promote Sustainable Development of Recycling Industry, with a view to stepping up concerted efforts in reducing waste at source and promoting the development of the recycling industry. The current local situation of collection and disposal of recyclables, and the related policies and support measures would be reviewed, and proactive approaches to facilitate development of the recycling industry would be identified. Suitable support measures in terms of land supply to better address the needs of the trade may be required.

- 7 - The Road Ahead

24. While the Government has been trying to optimise the use of our existing land, and leaving no stones unturned to create new land that Hong Kong needs, we should at the same time consider how best land should be used to support various economic activities, how to deal with the various economic activities displaced as a result of new and redevelopment projects, as well as how to address the diversified and sometimes competing land demands of the various sectors/industries.

25. Our current approach to land use planning in support of economic activities is more driven by macro-economic factors. For example, the “Hong Kong 2030: Planning Vision and Strategy Study” (the HK2030 Study) completed in 2007 adopted forecasting models to assess the future floor space demand for three types of market-driven economic land uses, namely the CBD Grade A offices, general business7 and special industries8, taking into account a number of factors including Hong Kong’s GDP growth, employment and population trends, etc. Sector/industry-specific inputs may be sought from relevant policy bureaux and in turn the relevant sectors/industries to assist in the land use planning.

26. However, if the Government is to foster the development of certain strategic sectors, there may be a need for a more sector/industry-oriented approach to land use planning, so that the issues of land supply and utilisation can be considered together with the overall policy for the various sectors/industries, and the specifics arising from individual sectors/industries could be taken into account specifically.

7 “General business” land use covers private offices (excluding CBD Grade A offices), industrial/office uses, flatted factories and private storages.

8 “Special industries” refer to land uses with particular accommodation requirements. This kind of land use will not necessarily be polluting but may require sites suitable for capital and/or technology intensive industrial operations which may have special infrastructural and/or locational requirements, and/or where special treatment, security, or other measures have to be taken.

- 8 - Economic Land Use Forecast and Review

27. The HK2030 Study provides a broad-brush estimation of the future land requirement of three major economic uses. Taking into account the latest global and local economic developments, PlanD will consider updating the said forecast in the HK2030 Study as appropriate. The inputs of relevant bureaux and departments will continue to be sought on the land utilisation of the various sectors/industries which they oversee, so as to help further analyse the demand for and supply of land of the specific economic uses, with a view to further supporting the Government’s policies on industry or economic development, and better utilising the scarce land resources of Hong Kong. Our aim is to obtain a holistic picture for better land use planning to duly cater for the development needs of different sectors/industries and, in the case of competing requirements, properly prioritise the land allocation.

Logistics Industry as an Example

28. Taking the logistics industry as an example, currently there is a large area of land being used for port back-up, open storage purposes and other industrial uses, such as rural workshops, warehouses or other informal industrial operations pertinent to the supply chain operation, in the New Territories. For the Hung Shui Kiu NDA, about 190 ha of land in the area is being used for port back-up, open storage or other logistics-related/industrial uses, and would have to be cleared for the NDA development. PlanD has identified about 62 ha of land for use as “Special Industry” (with a plot ratio of 5) intended for modern logistics development which, however, may not be able to accommodate all the existing operations in the area unless through substantial upgrading of these operations. Also, we have other major developments for increasing land supply under planning in Yuen Long South, New Territories North and North East New Territories NDAs, which may affect even more sites of similar uses. This substantial displacement of port back-up, open storage and logistics-related land uses, together with possible further development of current container terminals and river trade terminals, as well as the transformation of low value-added logistics operators to a higher niche, would need to be strategically addressed at the territorial level and in a holistic manner.

- 9 - Advice Sought

29. With a view to putting our limited land resources to more optimal use, we would like to solicit the Commission’s views on how much and what types of land Hong Kong should provide, as well as which economic activities should be given priority in the use of our scarce land resources. We also wish to seek views on more innovative and effective solutions on the use of land in support of the implementation of sectoral/industry-specific policies. We will take into consideration the advice of the Commission in formulating suitable planning for land supply and utilisation to support the sustained economic development of Hong Kong.

Development Bureau November 2013

- 10 - Annex

Increasing Land Supply

This note outlines the strategy on and the latest progress of the Government’s initiatives to increase land supply to meet the housing and other development needs of Hong Kong.

Hong Kong’s Development Needs

2. Completed in 2007, the “Hong Kong 2030: Planning Vision and Strategy” (the HK2030 Study) provides a spatial planning framework for the future development of Hong Kong and presents the broad direction adopted by the Government for land supply and town planning. The North East New Territories New Development Areas (NENT NDAs) and Hung Shui Kiu (HSK) NDA projects are clear examples included in the study.

3. No doubt, Hong Kong has changed considerably in recent years in terms of economic and social development. Projection of population growth and housing needs in future have been adjusted according to the latest trend. The increase in incoming visitors has generated a continued demand for hotels, retail and other tourism facilities. There has also been rising public aspiration for conservation, to name a few examples. This notwithstanding, the framework put forward in the HK2030 Study is still applicable today. The vision and the overall development direction are all capable of catering for our changing needs. In particular, the HK2030 Study proposes that Hong Kong should adhere to the principle of sustainable development in strengthening its position as Asia’s world city, a notable goal we set for ourselves in the years to come. Our policy blueprint on increasing land supply, as mapped out in the 2013 Policy Address, also follows the established spatial development directions - “doing more with less” through better utilising the highly-developed existing built-up areas and further developing the New Territories, planning for more development in the vicinity of railway stations, striking a balance between development and conservation, and further improving the domestic and regional transport networks.

4. Since the inception of the HK2030 Study, we have planned and completed several new major transport networks and infrastructures to provide more room for development. Nonetheless, our experience is that the growing population, the progressing economy and the rising public expectation over quality of life, as well as community and recreational services, all point to an increasing, not decreasing, demand for land. To continue to develop new land and build up a land reserve is a must. In the 2013 Policy Address, we have kick-started long-term planning of large-scale development projects, such as the preliminary

- 1 - feasibility study on further developing the New Territories North, with a view to providing stable land supply to meet the above demand.

5. More specifically, one of the Government’s policy objectives is to provide sufficient land to facilitate the sustained development of different economic activities. This is crucial to the successful implementation of various policies on industry or economic development. Hong Kong Science Park, industrial estates and data centres are some good examples. Taking into account the latest global and local economic developments, the Planning Department (PlanD) will consider updating its forecast of demand for land of economic use1 in the HK2030 Study. Meanwhile, the relevant Bureaux and Departments including the Commerce and Economic Development Bureau, the Transport and Housing Bureau, etc. will provide comments and relevant information on various industries and economic activities, such as the logistics industry and the information industry in Hong Kong, so as to help us further analyse and forecast the future demand and supply of land of the specific economic uses, with a view to further supporting the Government’s policies on industry or economic development and better utilising the scarce land resources of Hong Kong.

Strategy on Land Supply and Latest Progress of the Relevant Initiatives

6. As mentioned above, to meet the housing demand and various needs of the Hong Kong community, the 2013 Policy Address gave a clear account of the overall policy blueprint of the current-term Government on increasing land supply. The Policy Address clearly stated the guiding principle of facilitating social and economic developments, and the vision of improving the living space of the people of Hong Kong through increasing land supply. The Government will continue to adopt a multi-pronged strategy to increase land supply in the short, medium and long term, through the continued and systematic implementation of a series of measures, including the optimal use of developed land as far as practicable and creating new land for development.

Increasing Housing Land Supply in the Short to Medium Term

7. The ten initiatives put forward in the 2013 Policy Address will increase the supply of housing land in the short to medium term. These ten initiatives cover a broad range of areas in increasing land supply, including -

1 The HK2030 Study carried out a forecast for three types of economic land, including Central Business District (CBD) Grade A Offices, General Business which covers private offices (excluding CBD Grade A offices), industrial/office buildings, flatted factories and private storages, and Special Industries which refer to land uses with particular accommodation requirements, such as requiring sites suitable for capital and/or technology intensive industrial operations which may have special infrastructural and/or locational requirements, and/or where special treatment, security, or other measures have to be taken.

- 2 -  To review various land use zonings for identification of suitable sites for conversion to residential use, including converting suitable Government, Institution or Community (G/IC) and other Government sites, Green Belt (GB) sites, as well as industrial sites to residential or other appropriate uses, and to convert the land where the original intended use is not required anymore for housing or other uses that meet the more pressing needs in the community as soon as possible.

 To increase the development density of residential sites as far as allowable in planning terms, including the increase of development density of individual residential sites as appropriate, so as to increase the number of housing units that could be provided thereon, and to consider relaxing or lifting the administrative moratorium currently in force to restrict new land sale or lease modification in Pok Fu Lam and the Mid-Levels on Hong Kong Island to increase housing land.

 To continue to put into full play the integrated development of mass transportation and residential property, including taking forward the planning for residential development at Kam Tin South West Rail Kam Sheung Road Station and Pat Heung Maintenance Depot and to study the development potential of the adjoining areas, to carry forward housing development through the implementation of the redevelopment projects by the Urban Renewal Authority, and to expedite the development projects at the former Diamond Hill Squatter Areas (Tai Hom Village), former Cha Kwo Ling Kaolin Mine, former Lamma Quarry and Anderson Road Quarry, which do not involve land resumption; and

 To review land administration procedures to expedite land supply, and in the interests of the public, to expedite the administrative approval procedures and take other corresponding measures so that the approved planning applications for residential development can be implemented as soon as possible.

8. The latest progress of our initiatives to increase housing land supply in the short and medium term is as follows:

(i) Review of G/IC Sites (involving 36 sites with a total area of about 27 hectares and an estimated production of about 11 900 flats at this stage)

9. PlanD has completed the first round of review of sites zoned G/IC and other government sites, and has identified 36 sites suitable for residential development involving a total of 27 hectares (ha) of land. It is estimated that about 11 900 public and private residential flats could be produced if all these sites are used for housing development. Among the 36 sites, 18 had been zoned or

- 3 - were going through town planning procedures for rezoning for residential use as at end October 2013. PlanD will accord priority to process the rezoning of the remaining sites. The Government will continue to be on the lookout for other G/IC and government sites that have potential for residential and other uses in higher demand in the community.

(ii) Review of GB Sites (involving 13 sites with a total area of about 57 ha and an estimated production of about 23 000 flats at this stage)

10. In the Stage 1 GB review, PlanD examined GB sites that are no longer serving their intended function with a view to identifying suitable ones for housing development. After review of GB sites that are devegetated, deserted or formed in the New Territories, 13 sites with a total area of 57 ha are considered by PlanD as suitable for residential development, which can produce about 23 000 flats. PlanD is expediting the rezoning process. Among the sites, one is going through the statutory planning procedures for rezoning to residential use. As for the remaining 12 sites, it is estimated that their rezoning procedures will be completed as soon as possible afterwards. PlanD is carrying out the next stage of GB review to identify more suitable housing sites.

(iii) Review of Industrial Sites (involving 16 sites with a total area of about 30 ha and an estimated production of about 20 400 flats at this stage)

11. PlanD has conducted three rounds of review of industrial land since 2000. In the last round conducted in 2009, some 60 ha of land have been identified as suitable for housing and other land uses, among which some 30 ha on 16 sites are recommended for residential use. Among them, 13 (eight are privately owned whereas five are owned by the Government) have completed or are undergoing the statutory rezoning process. Some 14 600 units could be provided upon development or redevelopment of all the 13 sites. For the remaining three industrial sites, it is estimated that some 5 800 units could be provided as and when they are all developed or redeveloped. With a view to examining the latest utilisation of the existing industrial land, and the possibility of further converting some sites to other uses, including residential use, PlanD has started to conduct another round of review in end March 2013, which is expected to be completed in 2014.

(iv) Increasing the Development Intensity as Appropriate

12. To optimise the use of scarce land resources, PlanD has enhanced its efforts in reviewing the development intensity of existing sites for private housing developments in order to increase flat supply. In tandem, the development intensity of public housing sites and that assumed under major planning and engineering studies are also reviewed. In the process, PlanD will carefully assess

- 4 - how the plot ratio of a site can be optimised, taking into account practical considerations such as the traffic and infrastructure capacity in the area, the characters and development intensity of the neighbourhood, and the possible environmental, visual and air ventilation impacts on the area. To enhance flat production, planning applications seeking approval from the (TPB) for higher residential development density will also be actively considered taking into account the relevant planning considerations.

(v) Relaxing or Lifting the Pok Fu Lam and Mid-Levels Moratorium

13. The Government is considering relaxing or lifting the administrative moratorium currently in force to restrict new land sale or lease modification in these two areas. We will conduct detailed assessment of the potential impact before making a decision.

(vi) Expediting the Implementation of Approved Projects and Streamlining Land Administration

14. With public interest in mind, the Development Bureau (DEVB) will expedite the procedures and take other corresponding measures to facilitate the implementation of planning applications relating to residential development approved by TPB as soon as practicable, thereby expediting the flat production.

15. Meanwhile, the Lands Department (LandsD) is reviewing the feasibility of further simplifying the lease conditions and land administration procedures, and is considering the consolidation of the Practice Notes relating to approval under lease so as to facilitate land development to meet community needs. In the meantime, LandsD also holds discussions with the stakeholders.

(vii) Development of Former Diamond Hill Squatter Areas and Quarry Sites (estimated to provide about 27 ha of housing land in total for the provision of about 15 000 flats)

16. To expedite the development of the former Diamond Hill Squatter Areas (Tai Hom Village), as well as the former Cha Kwo Ling Kaolin Mine, former Lamma Quarry and Anderson Road Quarry, all of which do not involve land resumption, DEVB will actively consider making use of private developers’ capacity for development to provide the infrastructure and ancillary facilities, and construct public and private residential units thereon. For instance, the final Recommended Outline Development Plan of the Anderson Road Quarry site has been formulated, and its future development will cater for a planned population of 25 000 with the production of about 9 410 flats.

- 5 -

(viii) Development of the West Rail Kam Sheung Road Station, Pat Heung Maintenance Depot and the Adjoining Areas (the Kam Sheung Road Station and Pat Heung Maintenance Depot: involving about 33 ha of land with an estimate of 8 700 flats; the adjoining areas: involving about 110 ha of land)

17. In stepping up efforts to put into full play the integrated development of mass transportation and residential property, PlanD will take forward the planning for residential development above the Kam Tin South West Rail Kam Sheung Road Station and Pat Heung Maintenance Depot, with land of about 33 ha in total estimated to provide about 8 700 flats. In parallel, a land-use review of the adjoining areas of about 110 ha is being undertaken with a view to identifying more suitable sites for housing development. Upon completion of the review in end 2013, we will undertake local consultation on the development of the West Rail property and its adjoining areas including the Yuen Long District Council, Kam Tin and Pat Heung Rural Committees, etc. An engineering feasibility study will also be conducted to assess the infrastructural requirements. The Government will continue to explore vigorously the residential development potential of land along existing and planned railways.

(ix) Urban Renewal Projects (involving 4.9 ha of land for production of about 4 700 flats)

18. The Urban Renewal Authority (URA) will continue to redevelop old and dilapidated private buildings. To address the aspirations of property owners and speed up the pace of urban renewal, in his 2013 Policy Address, the Chief Executive invited URA to forge ahead with its “demand-led” redevelopment scheme. The three “demand-led” redevelopment projects selected in the first round of applications to the scheme are progressing well. One of them has already reached the stage of gazettal for land resumption, while the other two are at the acquisition stage. URA has commenced all four projects selected in the second round of applications. Invitation for applications for the third round has been closed by the end of September 2013. Some 50 applications have been received in the third-round application. URA is processing the applications received in accordance with established procedures.

19. In fact, the Government has also been carrying out various land use reviews on an on-going basis, including reviewing the vacant government sites, or those currently under short term tenancy or other government uses; and the next stage of review on GB sites and the new round of review on industrial sites, etc., and these reviews have started to bear fruits. We have identified a number of suitable sites in various districts throughout the territory which could be considered for conversion to residential use. Upon completion of studies to

- 6 - confirm feasibility of developing these sites, we will consult stakeholders and proceed with the town planning and other relevant procedures to convert the suitable ones for residential and other uses as quickly as possible.

Increasing Commercial Land Supply in the Short to Medium Term

20. Moreover, as stated in the 2013 Policy Address, while increasing the supply of housing land, the Government will continue to adopt a multi-pronged approach to supply more commercial land and facilities, so as to facilitate the further development of different economic activities in Hong Kong. In fact, in 2011-12 and 2012-13, the Government sold a total of nine commercial/business sites, providing about 400 000 square metres (sq. m) of gross floor area (GFA). In the first three quarters of 2013-14, the Government has sold/will sell three commercial/business sites, which are capable of providing about 130 000 sq. m of GFA. Apart from continuing to take the initiative in land sale to increase the supply of commercial/business sites, the Government is actively implementing a series of measures described below with a view to further increasing the supply of commercial land and facilities.

(i) Energizing Kowloon East (anticipated to provide an additional office floor area of about 4 million sq. m)

21. Kowloon East, being another core business district in Hong Kong, has the potential to supply an additional office floor area of 4 million sq. m. To expedite the process, we are considering relocating the existing government facilities in the two action areas of Kowloon East, and making available some vacant and appropriate sites in the action areas to the market as soon as possible. It is expected that these two action areas will be able to provide about 500 000 sq. m of floor area in total for office and other uses.

(ii) Reviewing the development intensity in Kai Tak Development

22. To facilitate the transformation of Kowloon East and in view of the public aspiration for increasing housing supply in the urban areas, we are reviewing the land use planning in the Kai Tak Development (KTD), on the basis of not compromising the planning aspirations for and land supply from the area in the coming five years. Based on the preliminary result of the planning review, there are scopes for suitably increasing the development intensity in KTD. The Government is conducting a technical feasibility study to assess the impacts of increasing the development intensity on the infrastructure and supporting facilities. Initial findings of the study indicates that the development intensity of four housing sites at the North Apron area can be increased by about 20% to provide about 1 000 additional flats. We are proceeding with the consultation on increasing the development intensity and the relevant town planning procedures. Upon completion of the whole study in mid-2014, we will take forward the

- 7 - planning proposals arising from the study via the statutory town planning procedures.

(iii) Conversion of existing government office buildings and suitable G/IC sites for commercial use

23. It is the Government’s policy to relocate government offices with no location requirements out of high value areas, including the Central Business Districts (CBDs), and to reprovision those accommodated in leased premises to government-owned premises as circumstances permit, so as to help increase the supply of offices in the market. Recent projects include disposing of the Government’s property consisting of a portion of 3rd floor and the whole of 4th, 5th and 6th floors of the Citibank Tower at 3 Garden Road, Hong Kong. Projects in the coming years include relocation of the Trade and Industry Department Tower in Mong Kok, relocation of leased offices of the Department of Justice to the Ex-Central Government Offices, and phased relocation of offices in the three government office buildings at the Wan Chai Waterfront.

24. Furthermore, the Government plans to convert suitable G/IC sites in the existing CBDs, including the Murray Road Car Park in Central and the Rumsey Street Car Park in Sheung Wan, for commercial uses.

(iv) New Central Harbourfront

25. Under the long-term planning for the New Central Habourfront, we expect that over 260 000 sq. m of new floor space will be provided for commercial uses, of which about 150 000 sq. m of new floor space for office and retail uses will be within Site 3. The planned development will gradually commence upon completion of the relevant infrastructure works and relocation of the existing facilities in Central and Wan Chai.

(v) Development of the North Commercial District on Chek Lap Kok Airport Island

26. Hong Kong International Airport is vital to Hong Kong’s economic development. To support the long-term economic development of Hong Kong, we will ensure the optimal use of the limited land on the Airport Island. The Airport Authority (AA) is now carrying out studies on the development strategies of the north commercial district (NCD) of the airport. Relevant planning work is expected to be completed in late 2013. In mapping out the development strategies of NCD, AA will take into account the planning of the three-runway system, so that the whole development can attain maximum economic benefits.

- 8 - (vi) Revitalising Industrial Buildings

27. The Government announced in October 2009 a set of measures to facilitate the redevelopment and wholesale conversion of old industrial buildings. These measures came into effect on 1 April 2010, aiming at providing more floor space for suitable uses to meet Hong Kong’s changing social and economic needs. Up to end October 2013, the Lands Department (LandsD) approved 82 applications under the measures, and the projects concerned have a capacity to provide a total of about 880 000 sq m of converted or new floor space for non-industrial uses.

Long-term Land Supply

28. Creating new land supply is an essential source of land in the long term. The Government is determined to develop new land extensively and build up a land reserve so that land can be used to meet future demand in a timely manner. Therefore, the Government will expeditiously take forward a number of long-term land supply projects including NENT NDAs, HSK NDA, development of Lantau Island (including the Tung Chung New Town Extension), review of deserted agricultural land in North District and Yuen Long (including the Planning and Engineering Study for Housing Sites in Yuen Long South), developing the New Territories North, exploring the option of reclamation on an appropriate scale outside Victoria Harbour, and rock cavern and underground space developments, etc. These long-term land supply projects will be our focus in meeting future population growth, providing land resources for economic developments and improving people’s living space and environment. The latest progress of the initiatives to increase land supply in the long term is as follows:

(i) Reclamation, Rock Cavern and Underground Space Developments (the near shore reclamation sites are expected to provide about 600 ha of land, and the cavern development projects are expected to provide a total of about 34 ha of land)

29. To build up a land reserve, supply land for housing and commercial uses and support the economic development of Hong Kong, the Government will press ahead with reclamation outside Victoria Harbour while endeavouring to keep the impact on the environment and marine ecology to a minimum. In accordance with the site selection criteria formulated after the Stage 1 public engagement (PE), the Civil Engineering and Development Department (CEDD) has identified five possible near shore reclamation sites, namely Sunny Bay and Siu Ho Wan in North Lantau; Lung Kwu Tan in Tuen Mun; Southwest Tsing Yi; and Ma Liu Shui near the estuary of Shing Mun River for further consideration. They can provide a total of about 600 ha of land. CEDD completed the Stage 2 PE in June 2013 and plans to complete the PE report by the end of 2013. Preparation work is being conducted for further technical studies on suitable sites. Apart from the

- 9 - near shore reclamation sites, CEDD will also study the feasibility of building artificial islands in the central waters between Hong Kong Island and Lantau. If supported by convenient and cost-effective transport infrastructure, the artificial islands can be developed as new towns providing housing and employment opportunities in the long term.

30. Reclamation aside, rock cavern and underground space developments are also viable sources of land supply. The Drainage Services Department (DSD) is studying the feasibility of relocating the Sha Tin Sewage Treatment Works to caverns to release about 28 ha of land for housing and other uses. DSD has completed the Stage 1 PE and the relocation proposal is generally supported by the public. The feasibility study will be substantially completed in early 2014. DSD is conducting preparation work for the investigation and design for the relocation project with a view to commencing the construction works as soon as possible. The Government will aim at a balanced development on the released land for housing, commercial and other beneficial uses. In addition, the Government has proposed to relocate three other potential public facilities, i.e. Diamond Hill Fresh Water and Salt Water Service Reservoirs, Sai Kung Sewage Treatment Works and Sham Tseng Sewage Treatment Works, to caverns to provide about a total of 6 ha of precious land in the urban areas. We are collating the public views on the use of these three sites with a view to preparing for the commencement of the respective feasibility studies. Furthermore, CEDD is readying for commencing a territory-wide study on underground space development in the urban areas of Hong Kong to identify potential areas for underground space development, with a view to creating space for commercial and other uses and enhancing the connectivity of underground spaces in the urban areas. A pilot study will also be conducted on selected strategic areas.

(ii) New Development Areas (NDAs) (the two NDAs in Fanling North (FLN) and Kwu Tung North (KTN) in the NENT are expected to provide about 333 ha of developable land, while HSK NDA is expected to provide about 446 ha of developable land)

31. NDAs are a major source of land supply to meet the long-term housing, as well as other social and economic development needs of Hong Kong. The NENT NDAs Planning and Engineering Study is largely completed while the HSK NDA Planning and Engineering Study is in progress.

NENT NDAs

32. Adjustments have been made to the NENT NDAs project. We will proceed with the KTN and FLN NDAs as soon as possible as extensions to the Fanling/Sheung Shui New Town, so as to meet the demand for housing and other development needs. The Ping Che/Ta Kwu Ling NDA will be re-planned under a new study on the New Territories North and the public will be consulted again.

- 10 - The development intensity of the KTN and FLN NDAs has been suitably increased. The housing units have increased from the original 47 300 to 60 700. The proportion of public housing, including public rental housing (PRH) and Home Ownership Scheme (HOS), has been increased from less than half (49%) to 60%. Subject to the market situation, we will apply the “Hong Kong Property for Hong Kong People” measure to private residential sites.

33. Apart from provision of housing land in Hong Kong, development of NENT NDAs will also provide land for economic and community uses. Taking advantage of their proximity to a number of existing and new boundary control points (BCPs) and Shenzhen, the strategically located NDAs will serve to meet various strategic land use requirements and capitalise on the increasing economic interaction with the Mainland. A cluster of “Commercial, Research and Development” sites (about 14 ha) along the Fanling Highway in the KTN NDA has the potential to be developed into various types of office, research and development uses, as well as to provide space to support the development of industries which Hong Kong enjoys clear advantages in. In the northwestern part of the KTN NDA, about 8 ha of land for “Research and Development” uses has been reserved which could create synergy with the Lok Ma Chau Loop. About 37 700 new jobs will be created in the NDAs, including working opportunities in the research and development, commercial and retail and community services sectors. A total of 63 ha of G/IC sites and 58 ha of open space have also been planned in the NDAs so as to provide community facilities and open space for future residents in the NDAs and existing residents living nearby.

HSK NDA

34. We have also formulated a Preliminary Outline Development Plan (PODP) for HSK NDA, which will provide about 446 ha of developable land, including 145 ha of housing land for about 60 000 residential units. To achieve a balanced community and avoid creating a homogenous residential area with a high proportion of public housing, about 51% of the residential flats will be allocated for public housing (including PRH and HOS) and the remaining 49% will be for the development of various types of private housing.

35. HSK NDA will provide about 100 000 new job opportunities. An area located in the northwestern part of the NDA has been reserved for a Logistics and Technology Quarter designated for “Special Industry” so as to accommodate logistics land uses (62 ha) as well as to provide flexible space for Information Technology and Telecommunications industries, including data centre, testing and certification facilities and business uses (10 ha). These uses will be the major source of employment within the NDA. It is envisaged that a major town centre with a regional shopping centre cum hotels and offices will take shape in the vicinity of the proposed West Rail (WR) HSK Station, serving not just the NDA but the wider North West New Territories region. To create a secondary focal

- 11 - point, a wide range of retail and commercial uses will be clustered around the existing WR Tin Shui Wai (TSW) Station to also serve the needs of TSW residents for additional commercial facilities. These two urban nodes will provide significant employment opportunities for a wide range of skill sets. The Stage Two Community Engagement which started on 15 July 2013 had been conducted for three months to seek comments from the public on the PODP.

36. Land in the KTN and FLN NDAs, as well as the HSK NDA is expected to be made available for development from 2019-20 and 2021-22 onwards respectively.

(iii) Developing the New Territories North

37. Apart from NENT NDAs and HSK NDA, there are vast tracts of undeveloped land in the New Territories North (including land released from the Closed Area) that could be considered for meeting the long-term development needs of Hong Kong. As mentioned in the 2013 Policy Address, a planning study for further development of the New Territories North will be undertaken by PlanD to examine the further development opportunities of undeveloped areas, and feasibility of developing a modern new town there of a similar scale as the Fanling/Sheung Shui New Town. A preliminary feasibility study, which also covers the Fanling Golf Course and Chief Executive’s , will commence in early 2014. Besides, in view of the strategic location of the New Territories North which is in the proximity of the BCPs, more land uses which are capable of creating jobs can be planned.

(iv) Review of Deserted Agricultural Land in North District and Yuen Long (involving about 257 ha of land)

38. To make more gainful use of agricultural land which is currently used mainly for industrial purposes, temporary storage, or deserted, the Government is reviewing a total of about 257 ha of such sites in North District and Yuen Long, with a view to identifying more suitable sites for housing development as soon as possible. In this connection, four areas in Kwu Tung South (KTS), Yuen Long South (YLS), Fanling/Sheung Shui Area 30 (FSS) and Kong Nga Po (KNP) have been identified for planning and engineering studies to ascertain the feasibility of and scope for residential development. The studies on the KNP, YLS and KTS sites have already commenced for completion by 2014/2015, while the study on the FSS site will be conducted in two phases, with Phase 1 to commence in end 2013 for completion by mid-2014, and Phase 2 to commence upon review of Phase 1’s findings. According to the preliminary assessment, some of the sites are anticipated to be available for housing development in 2020 at the earliest.

- 12 - (v) Development of Lantau Island - Tung Chung New Town Extension (anticipated to provide about 188 ha of developable land)

39. With the anticipated completion of the Hong Kong – Zhuhai – Macao Bridge and the Tuen Mun – Chek Lap Kok Link, Lantau Island, particularly Tung Chung, is poised to become an important transport hub to overseas destinations and the Pearl River Delta region. PlanD and CEDD are undertaking the Tung Chung New Town Extension Study to examine the feasibility of extending the Tung Chung New Town to accommodate a target population of 220 000 and leverage on future economic opportunities that would help create more jobs for Tung Chung residents. Stage 2 PE of the study to consult the public on the initial development options was completed on 21 July 2013. According to the initial land use options, the “Livable Town” and “Economic Vibrancy” options in Tung Chung East will provide about 38 000 and 33 000 flats respectively, while Tung Chung West will provide about 15 000 flats. The study is anticipated for completion by 2014.

Development Bureau November 2013

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