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Customers to Bear Cost of Self-Storage Safety Improvements in Hong Kong

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The push for stricter self-storage regulation in Hong Kong is likely to result in higher rents for tenants and even several storage operators going out of business. Though rates have increased up to 20 percent during the last five years, calls for new building configurations designed to slow the spread of fire will force storage operators to raise rates and lose leasable space, according to the source.

Among the proposals put forth by the Fire Service Department is a corridor requirement of 2.4 meters between self-storage zones. If passed, the measure would likely result in operators needing to double rates, according to Helen Ng, CEO of the Store House, which has facilities in Hong Kong, Malaysia and Singapore. “It’s a bit of a knee-jerk reaction by the authorities,” Ng told the source. “No hotel even has a 2.4-meter corridor.”

Oliver Leung Wing-hong, chief operation officer for RedBox Storage, estimated rates could increase by 30 percent over time to compensate for lost rentable space and the cost of making facility alterations. Building firewalls could cost up to HK$12 million and take 18 months to complete, he told the source, adding, “It’s easy to introduce regulations, but who’s going to [pay for the changes]?”

Potential consumer effects should be considered for any new requirements imposed on self-storage operators, according to Kevin Chan, chairman of Store Friendly, which operates 100 storage facilities across the city. “The most important consideration is whether [regulations] will affect our customers,” Chan told the source. “Where are they going to store their stuff if all operators have to make changes at the same time? We all want to achieve a win-win situation here.”

An estimated 40 self-storage businesses have shuttered operation since the fires last summer, according to the source. One operator went out of business after investing $3 million to build a 10,000-square-foot facility in the Tsuen Wan area because the building owner said self-storage wasn’t permitted in the land lease, according to Luigi La Tona, executive director of Self Storage Association Asia.

La Tona indicated more business closures are likely to occur as a result of new regulations, but growth opportunities could also result for the region’s largest players. “It will be the survival of the fittest,” he told the source. “All the mom and pops that are just getting by will disappear—a hundred percent. However, those that can afford to stay in the game will continue, and they will have the potential to grow.”

Sources:

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