Sunday, March 18, 2012

Shoe-box factories and unlawful tenants

Business Times: Sat, Mar 17
THE shoe-box factory has caught the national development minister's attention, and it's not all good.


Writing in his blog, Khaw Boon Wan said that shoe-box apartments serve a purpose as many singles do find them adequate for their housing needs. 'But shoe-box factories? As small as 50-80 sqm (smaller than a typical 7-Eleven shop)? Can a factory truly operate in such a small space?'


He noted that many tenants of shoe-box units in industrial parks are legitimate non-industrial tenants providing relevant support services to the industrial tenants for which the park is built. 'For example, some are staff canteens and in-house clinics serving the factory workers.


'However, there are some who appear to be unauthorised non-industrial tenants. They appear to be abusing the lower rentals at industrial land/parks for normal commercial/office activities which should rightly be in commercial land/sites. This is wrong.'


He said that offices and shops are not considered industrial use and are not allowed within industrial developments.


But he added that non-industrial activities such as child-care centres, staff canteens and showrooms are allowed within industrial developments, provided they support the main industrial activities and, together with lift lobbies and other circulation areas, do not occupy more than 40 per cent of the industrial development.


Mr Khaw concluded his blog post by putting the onus on developers and property agents, saying that they must make it clear to prospective buyers that industrial units can only be used for industrial activities.


'They must not mislead buyers into misusing industrial land/ parks for non-industrial activities,' he wrote.


When contacted, Dennis Yeo, Colliers International managing director, told BT that occupation by unauthorised non-industrial tenants stems from, among other things, a lack of affordable commercial space.


'It's really a mixed bag of issues. Unauthorised use of industrial land is not driven by the size of the unit. Unauthorised use in industrial land occurs because it is the cheaper option, and also because of the scarcity of cheap commercial and office space.'


He believes that the government must exercise caution in the event that it implements measures to curb the misuse of industrial land, stressing that the issue of commercial land shortage cannot be resolved overnight.


'There is a pressing need for more commercial space to be built and to cater to the small businesses as they cannot afford the rent at prime locations . . . but all this takes time.'


Nicholas Mak, head of research at SLP International, agreed, adding that the government must bear in mind the potential implications that policy changes might have on small and medium-sized enterprises (SMEs).


'In order for Singapore to be competitive and provide employment, you need SMEs, and they are vulnerable to economic changes and rising costs. If the government were to suddenly chase everyone out, where would they go? Some would close down . . . while other may go to Iskandar Malaysia and create jobs there.'


Another difficulty is how the government should go about facilitating the process of weeding out these unauthorised non-industrial tenants.


Mr Yeo said: 'The government cannot discriminate between the industries and industrial buildings as there would be repercussions. It cannot be enforced now and the enforcement cannot be phased. If not, everybody would be pleading to be put at the last phase.'


To solve the underlying problem of unauthorised non-industrial tenants thus requires addressing the fundamental shortage of commercial space, he said.


According to Mr Mak, the government can take a cue from the latest Industrial Government Land Sales Programme, where smaller parcels of industrial land were made available. 'One way is to sell smaller parcels of office space, perhaps in the city fringe area. Some suggestions include Toa Payoh or Braddell.'


To ensure consistency between commercial tenants and unauthorised non-industrial tenants who are taking advantage of the lower rental costs, the government could consider imposing a levy, tax or developmental charge, said Mr Mak.


Refining and expanding the present definition of what constitutes industrial activities could be another alternative, said Mr Yeo. 'You can widen the definition and redefine what is allowed under industrial use to include product life cycle. If you are involved at any point of the product life cycle, you can qualify under this definition.'...

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