Land-use planning and market adjustment under de-industrialization: Restructuring of industrial space in Hong Kong

This study explores the relationship between land-use planning regulation, changing use of industrial space and market adjustment in a compact city of Hong Kong under deindustrialization over the past three decades. Planning regulation defines and attenuates the rights of property owners in the use of industrial premises. Property users need to secure additional rights, through planning applications, from the regulatory authority before converting the premises for higher-value non-industrial uses. This study reveals that, under a flexible planning regulatory regime of facilitating incremental land-use conversion by the users in industrial property, the development market actually produced more rather than less industrial accommodation. A Supply Adjustment Model is proposed to explain this unexpected market phenomenon. Empirical estimations by Johansen cointegration analysis and Vector Error Correction Model (VECM) confirm opposite movements in the supply and property prices of new industrial and office accommodation, indicating market competition and segmentation between these two sectors.