A fire that killed two firefighters and ravaged an SC Storage facility in Hong Kong last month has prompted officials to suspend self-storage development inside industrial buildings. The incident has also stirred regulatory debate among government officials and service agencies. Increased scrutiny is likely to lead to stricter fire-safety standards, which could trigger a wave of business consolidation in the region due to the expected high cost of rule implementation, according to the source.

“We expect operators will be anxious to work with the various regulatory bodies to ensure there is a clear path forward to support this vital and growing sector,” said Darren Benson, executive director for advisory and transaction services, industrial and logistics at CBRE Asia, a commercial real estate services and investment firm. “It should also speed up much-needed industry consolidation, with smaller operators likely to be consumed by bigger players, which in turn might enable more to buy and operate from whole buildings rather than occupying portions of larger ones.”

New regulations could enable deep-pocketed investors to gain a larger share of the 2.8 million square feet of available storage space in Hong Kong, according to Luigi La Tona, executive director of Self Storage Association Asia (SSAA), a trade association dedicated to assisting self-storage operators and industry suppliers working in emerging markets along the Pacific Rim. “Investors won’t be scared off by the latest developments because they understand the potential growth of the industry,” La Tona told the source.

La Tona also believes the SSAA is in position to help shape new regulations since the government has a limited understanding of self-storage. “As an industry body, we would be keen to work with officials to help formulate regulations for the industry,” he said.

In the meantime, the SC Storage fire has also caused concern among customers. Kwok Yin-yan has rented self-storage space for more than 20 years but is worried about fire safety. “Fire is the biggest risk when renting such spaces,” she told the source. “The storage rooms use electrical door locks, and I may be trapped inside if any fire broke out. I could take my stuff back home, but that could take several months to arrange.”

Some storage facilities in the region are void of ventilation and have water leakage, she added.

RedBox Storage, which operates three self-storage facilities in Hong Kong, has communicated with its customers about ways the company can improve safety and security, according to Matthew Chee, chief executive. “There has been an uptick in inquiries from new customers seeking facilities in the last week, which does indicate concern,” he told the source.

SC Storage occupied seven floors of the Amoycan Industrial Centre building in the Kwun Tong district. The fire consumed the third and fourth floors, destroying more than 200 units, the source reported. Dangerous goods subject to regulations on approved storage premises and licensing from the director of fire services were found on the first, fourth, fifth and sixth floors.

Sources: