Assessing the impact of revitalized old industrial buildings on the value of surrounding properties

Abstract

Purpose– The purpose of this study is to explore the effects of revitalization of old industrial buildings on the market value of the neighbourhood residential properties. Hong Kong’s economy has undergone a remarkable transformation in the past three decades. The most visible phenomenon in this transformation is the relocation of traditional manufacturing activities from Hong Kong to China since the 1990s. This has led many of the old industrial buildings in Hong Kong to be empty/underutilized and dilapidated. The Hong Kong Special Administrative Region Government launched the “Revitalizing Industrial Buildings Policy” to revitalize these underutilized properties with the aim to provide suitable land and premises to meet local’s economic and social needs.Design/methodology/approach– The study used a hedonic price model to determine whether there is a relationship between revitalization projects and neighbourhood residential property values and the influence of revitalization programmes on the residential property price if there is such a relationship. The study is based on a sample of 4,015 residential transactions obtained from the residential developments located near three large-scale revitalization projects in an old industrial district, Kwun Tong.Findings– Empirical findings suggest that revitalization programmes have not brought net positive price effects on the value of neighbourhood residential properties. This is in line with findings of some previous studies. However, it reveals that both the mode and scale of revitalization projects have different impacts on the neighbourhood: wholesale conversion has less negative impacts compared with redevelopment, while the larger the scale of a revitalization programme, the greater are the negative impacts on nearby property values. The study also finds that negative externalities generated by the revitalization during and post-revitalization stages are almost similar in magnitudes.Research limitations/implications– The results imply that industrial revitalization projects located adjacent to residential developments both reduce the value of the latter and discourage potential property buyers. The negative public perception of these properties diminishes their value and hence decreases the value of the property.Practical implications– The paper raises the concern about the importance of adequately addressing issues of planning and zoning to minimize the negative externalities arising from urban renewal projects.Originality/value– This research paper is first of its kind to analyze the effects of revitalized industrial buildings on the value of neighbourhood properties in Hong Kong. The tangible benefits identified in this study would be incentives, or otherwise, to motivate the revitalization policy in general.