HK government cuts data center conversion fee
By Carol Ko 18-Jun-2012
The Hong Kong Office of Chief Information Officer (OGCIO) today announced to implement two measures to ease the conversion of industrial buildings into data centers.
The two measures, to be open for application from June 25 2012 to March 31 2016, were first announced in the 2012-13 Hong Kong government budget to facilitate data center development in Hong Kong, a city known for its scarce land resource.
Exemption of waiver fee
Starting next week, land owners of industrial buildings can apply for an exemption of the waiver fee for converting parts of eligible industrial buildings into data center use.
There are currently about 1,300 industrial buildings which are suitable for converting their use into data centers, said Daniel Lai, Hong Kong government CIO. "The OGCIO does not maintain a list of such buildings. Interested parties can, however, inquire about them from real estate agencies," Lai said.
Until now, to partially change the use industrial buildings for "IT and telecoms" use -- including data centers -- a land owner needs to obtain a waiver (also known as a "data center waiver") from the Hong Kong Lands Department, and pay a "waiver fee" to reflect the enhanced value of the property. The waiver fees, which vary according to location, are currently set at HK$69/sqm (US$8.89) per annum for premises in the Hong Kong Island and Kowloon, and HK$45/sqm (US$5.79) per annum for premises in the New Territories.
As part of this first measure, the waiver fee exemption will apply to data centers of all tiers (Tier I to IV), provided the building concerned is located in a zone designated for "Industrial", "Other Specified Uses annotated 'Business'", or "Commercial" use, and aged 15 years or more.
Assessment of lease modification premium
The OGCIO also announced to assess the premium for lease modification on the basis of "high-tier data center" (Tier III and Tier IV data centers) use. Irrespective of zoning, existing industrial buildings land owners can apply for an assessment for lease modification, including land exchange, on existing industrial lots.
To get assessed, the data center concerned must reach at least 40% of the maximum development intensity allowed for the site, or a plot ratio of 2.5, whichever is higher.
"The Government will process the applications expeditiously," Lai said. "The Office's Data Centre Facilitation Unit will provide technical advice to the Lands Department on issues related to data centers. I encourage the trade to take advantage of the measures early."
The Lands Department has on the same day set out the application criteria for the above two measures in a Practice Note (3/2012).
Other than the two measures on land use conversion, Lai said the government has reserved two hectares of land in Tseung Kwan O Industrial Estate for the development of high-tier data centers. The first site, of about one hectare, will be available for open bidding in 2013.
"OGCIO's Data Facilitation Unit has received about 100 enquiries on building data centers in Hong Kong. Most of them are from local companies in Hong Kong, others are from overseas and Mainland China, and there is one enquiry from India," Lai said.
"In response to industry demands, the government has also recently relaxed the requirements for the number of car park spaces and washroom facilities for new applications of data center construction," Lai added.