Sometimes small is really beautiful — and also profitable.
A luxury flat on the Peak costs cheaper to rent per square foot than a Sham Shui Po subdivided flat, a car park slot in Tin Shui Wai or a columbarium unit in Wo Hop Shek.
It seems the smaller it gets, the more expensive it is.
Now comes a mini storage facility in Kwai Hing. A local paper reports that a 40-year-old industrial building is selling 38 of its 45 square foot mini storage units for at least HK$340,000 each.
At that rate, the average selling price is more than HK$7,500 per square foot, higher than the going rate for a three-bedroom flat in Cheung Kong’s Mont Vert, although less than its smallest 170 square foot apartment that sells for HK$1.7 million.
However, there is a sweetener. Buyers of the cubicles are guaranteed a 5 per cent yield in the first year, which trumps the government’s i-bond, except that the seller charges a management fee of HK$200 per month which would lower the effective yield to about 3.5 per cent.
But the potential yield for buyers may increase as rents keep going up. An 80 square foot unit, with actual usage of about 40 square feet — just enough for two queen-size beds — can yield a monthly rental of HK$1,000 to HK$1,200, up more than 10 per cent this year
The seller bought the storage facility for HK$8.5 million last year. A back-of-the-envelope calculation shows he would make HK$5 million if all the mini storage units are sold.
Demand for such units is surging. A friend of mine says his friends often grumble about their crowded flats, small as these are already.
Still, they don’t like to throw anything away, forcing them to compete for space with their worldly belongings.
If it was data that was crowding them out, they would have moved them to Apple or Google cloud for storage.
But these are physical things and the only way they could clear them from their flat, short of dumping them, is to have them in third-party storage. That’s where the tiny cubicles come in.
Ever wondered why developers like to repackage land into different uses and build apartment buildings into smaller units?
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