Déjà vu

In the wake of the failed industrial building revitalisation scheme almost a decade earlier, the government now plans to convert one of the city’s key industrial areas here into a commercial district. The initiative has so far been met with a lukewarm response. 

Over the lack of space and soaring rents of commercial properties, a wide array of businesses have been relocated in recent years to industrial buildings, which not only house factories but also offices, co-working spaces, studios, galleries, gymnasiums and so forth. But this might change soon. 


Average transaction price of industrial buildings along Avenida de Venceslau de Morais now 

As the government plans to convert the industrial buildings in Areia Preta, one of the key industrial areas here, into a commercial district, many are worried this will spike the rents and prices of industrial spaces, forcing out the existing tenants that are usually small- and medium-sized enterprises (SMEs). However, industry insiders assure this scenario might not happen soon given the lack of details on how this ambitious plan will be materialised.  

In the long-awaited draft master plan for the city’s urban development (2020-2040), which was unveiled this September and is now undergoing the public consultation exercise, the government proposes the usage of the industrial buildings along Avenida de Venceslau de Morais in Areia Preta will be gradually shifted to non-industrial usage. This move is to “increase the value of land and industries in the district”, as well as to reduce the impact of industrial activities upon residents in the area and improve the overall living standards, the consultation document read. Only the Zhuhai–Macao Cross Border Industrial Park in Ilha Verde on the Macau peninsula, the Pac On area in Taipa, and the Concordia Industrial Park and part of Ka-Ho in Coloane will be zoned for industrial areas in the future, the draft plan adds.  

Acknowledging the good will from the government over this initiative, local urban planner Rhino Lam Iek Chit thinks “it is not easy” for this to be achieved with the “lack of details for implementation” at the moment. “The ownerships of industrial buildings are dispersed, making it difficult [for owners] to reach consensus for converting the buildings,” he says, pointing out “insufficient planned amenities” in Areia Preta, for instance, transportation infrastructure and planning, to support the development of the area into a commercial district.  

The city’s laws mandate any substantial changes to any types of properties, namely redevelopment, require the approval of all owners of the property. Though some have proposed to lower the ratio of ownership required for redevelopment for years, particularly for old buildings in the neighbourhood districts, the laws have remained the same. 

“Quite a many units in the industrial buildings in the area have already been used for other purposes than industrial usage,” Mr. Lam notes. “What the government should do is to find out how many non-industrial businesses now operate in industrial buildings, … and legitimise their operations.” The city’s legal framework now does not allow a mix of usages in industrial buildings, and the administration has banned the operations of sport facilities and entertainment venues located in industrial buildings in the past few years. 

“What the government should do is to find out how many non-industrial businesses now operate in industrial buildings, … and legitimise their operations,” says local urban planner Rhino Lam Iek Chit  

No room for speculation 

Gregory Ku Ka Ho, managing director of property agency Jones Lang LaSalle Macau (JLL Macau), also highlights the lack of details for the transformation of industrial buildings. “The government does not say whether any incentives will be provided,” he remarks. “If there is none, it’s extremely difficult to convert industrial buildings here because the ownerships are diverse.” 

He also cast doubts on whether the city requires a lot of commercial districts, as the draft master plan spells out various commercial districts zoned across the territory besides the area of Avenida de Venceslau de Morais. The official document defines commercial districts as areas offering spaces for daily operation of companies, as well as accommodating the industries of finance, retail, dining, and convention and exhibition.  

“Let’s use office space as an example: only three office towers have been completed in the past 15 years, including namely Fortuna Business Center (FBC), Finance & IT (FIT) Centre, but there are still a number of units available for rents in these towers,” Mr. Ku illustrates. “So it remains to be seen whether the demand could match the supply.” 

Thus, the initiative is expected to have little impact upon the value and rents of industrial units. “[Without] more details of how the initiative will be gradually enforced, I don’t see there is much room for speculation on industrial buildings, whose value has already risen a lot in the past,” Mr. Ku notes.  

The value of industrial units were hardly unchanged and hovered below MOP10,000 (US$1,250) a square metre before 2011, but following the introduction of an industrial building revitalisation scheme in April 2011, the value of industrial units surged between over 60 percent and 73.4 percent a year between 2011 and 2014. The revitalisation scheme aimed to turn industrial buildings — about 110 industrial towers across the city with the gross floor space of 1.3 million square metres — into residential towers in a bid to bolster the local supply of small and medium-sized flats. But the scheme, requiring 70 per cent of the flats in the converted industrial premises to be small flats, had met with tepid responses with only two successful cases over the lack of any concrete incentives, and it had been shelved after the implementation for three years.  

The rising momentum of industrial property has been halted since then. Government figures show the average transaction price of industrial units last year stood at MOP54,979 a square metre, down by 2.5 percent from 2018 and just up 1 percent from MOP54,250 a square metre in 2014. Besides the value, the annual average number of transactions of industrial properties hit over 251 in the 2011-2014 period, compared with the annual average of just 119 between 2015 and 2019. 

“Unless more details of how the initiative will be gradually enforced, I don’t see there is much room for speculation on industrial buildings, whose value has already risen a lot in the past,” says Gregory Ku Ka Ho, managing director of JLL Macau 

End-user market 

Roy Ho Siu Hang, director of another real estate firm, Centaline Macau, says there has not been any increase of enquiries and transactions of industrial units since the draft master plan was publicised. “I don’t see this new initiative will spike the industry property market, in terms of sales, prices and rents, in the near future, as the market still waits for more information from the government over the plan,” he notes. Following the suspension of the industrial property revitalisation scheme in 2014, the real estate expert adds most buyers for industrial units in the past few years were end-users rather than investors, meaning they would not easily put up their units for sale.  

Asked about the plan for Avenida de Venceslau de Morais during one of the consultation sessions for the draft master plan, Mak Tat Io, head of the urban planning department at the Land, Public Works and Transport Bureau (DSSOPT), only said the government would announce more information about the conversion of industrial units, namely, the conversion scale and incentives, in due course. Raimundo Arrais do Rosário, Secretary for Transport and Public Works, also remarked in the same occasion they were not certain how many industrial buildings along Avenida de Venceslau de Morais would be successfully transformed in the next two decades.  

But Mr. Ho believes if more incentives are rolled out, the prices for industrial units in the area might rise. “The average transaction price of industrial units at the area of Avenida de Venceslau de Morais now stands at HK$3,000-HK$4,000 [US$387-US$516] a square foot and could surge to HK$4,000-HK$5,000 a square foot in the future should the implementation of the initiative prove to be feasible,” he says.