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Tuesday, June 28, 2016, 10:15

Mini-storage players take the heat

By Oswald Chan
Mini-storage players take the heat

Hong Kong’s mini-storage industry – thrusted into the spotlight following a spate of fatal blazes in rundown industrial buildings – is determined to keep the business alive despite moves by the government to crack down on blatant breaches of fire safety regulations in aging premises in which its facilities operate.

The industry has enjoyed huge popularity since it gained prominence in the early 1980s as local residential homes prices went through the roof, forcing many residents to maximize their living space by storing away off-season belongings like thick clothing and blankets, as well as other unneeded paraphernalia, in a growing number of mini-storage facilities scattered across the city.

Industry players told China Daily they’re willing to play by the rules and work with the authorities in slapping more stringent regulations on mini-storage units that pose serious fire risks, although they’re bound to hit them in the pocket in terms of higher operational costs.

Last week’s deadly inferno at a mini-storage facility in Amoycan Industrial Centre in Kowloon Bay that claimed the lives of two firemen and left more than 10 others injured has added extra urgency to keep the industry in check.

The fire prompted Secretary for Security Lai Tung-kwok to announce that the government will launch a city-wide inspection of all mini-storage facilities to avoid a repetition of such a tragedy. The Security Bureau will also spearhead a cross-departmental team to study how stringent fire prevention standards can be implemented at mini-storage sites, with the possibility of regulations being tightened.

Hongkong Storage – a mini-storage company that has been in business since 1997 with more than 3 million cubic feet of mini-storage space in major locations across the city – was mum on whether proposed stringent laws for the sector would hit its operations.

While Hongkong Storage’s response showed it may not be on the same page with its peers, the Self-Storage Association Asia – a group representing self-storage business operators – has thrown its weight behind the government’s moves.

“The association will work hand in glove with the government and regulators to work out whatever changes are necessary to improve and upgrade security in mini-storage premises,” Luigi La Tona, the association’s executive director, told China Daily.

Mini-storage players take the heat
Firefighters monitor the scene of a four-alarm fire at Amoycan Industrial Centre in Kowloon Bay on Friday. The need to enforce more stringent fire prevention standards has been made more pressing as the local mini-storage industry is set to grow. (Parker Zheng / China Daily)

“We’ll talk with them and let the market decide what sort of action should be taken.”

“We’re still optimistic about the self-storage business in Hong Kong although the latest fire incident may force the government to adopt stricter measures to boost security in self-storage premises. The demand (for self-storage facilities) is still there and the incident will not deter demand for such services,” La Tona said.

According to market estimates, there are currently 500 mini-storage facilities in Hong Kong, mainly in industrial buildings. But, the government is in the dark about the actual number.

US-based real estate advisory firm CBRE has identified 81 major operators in Hong Kong, with the top five players commanding 50 percent of the market share.

Greenfield sites are scarce in Hong Kong and are usually unsuitable for self-storage use due to their pricing, size or location. Therefore, turning commercial buildings or aging factory premises into self-storage facilities appeals to operators due to their location and rental uplift.

Following a fire in an industrial building in Cheung Sha Wan that killed a fireman in 2010, the government pledged to carry out a thorough inspection of all similar buildings in the city. At that time, it identified 481 factory buildings in Hong Kong that were completed before 1973 and did not have automatic sprinkler systems. However, no further updates have been given in the wake of last Thursday’s blaze in Kowloon Bay which burned for more than 100 hours before being put out, giving rise to strong suspicion over what might have been stored on the premises in the absence of stringent fire safety regulations.

Industrial buildings completed before 1973 are not required to meet fire prevention standards which new buildings have to comply with. The eight-story Amoycan Industrial Centre, located on Ngau Tau Kok Road, was completed in 1961 and lacks automatic sprinkler facilities.

According to the Fire Safety (Buildings) Ordinance enacted in 2007, some 12,000 buildings (commercial and residential) in Hong Kong that were completed in 1987 or before are required to upgrade their fire safety facilities, but old industrial buildings are exempt.

The need to enforce more stringent fire prevention standards has been made more pressing as the local mini-storage industry is set to grow.

“With strong consumer demand due to favorable demographic trends, as well as robust e-commerce expansion, investor interest in the self-storage business has picked up in recent years, as reflected in the multiple self-storage investment deals we have seen in the past few years, plus greater interest from global real estate funds,” said CBRE Asia’s Industrial and Logistics Executive Director Darren Benson.

According to a CBRE report in June last year, there’s a need for an additional 158,000 square feet of rentable self-storage space in Hong Kong over the next decade to supplement its stock of 2.6 million square feet of rentable self-storage space.

oswald@chinadailyhk.com

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