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 Hong Kong 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.