In the early 20th century, with the launch of land reclamation and building construction projects, urbanisation of Sham Shui Po began. Road and street network linking the district with the urban areas of Kowloon were developed. In the 1920s, main roads and streets like Cheung Sha Wan Road, Lai Chi Kok Road and Yen Chow Street were constructed. Sham Shui Po then became a new community, accommodating a large population. Sham Shui Po Police Station, now at the intersection of Lai Chi Kok Road and Yen Chow Street, was completed in 1925 to oversee the area. By the 1930s, the central Sham Shui Po area was well developed into a prosperous area with a full range of industrial and commercial establishments, including food manufacturing, clothing factories, photographic studios, foreign goods shops etc. After the Second World War, central Sham Shui Po became a base for Hong Kong’s clothing and textiles industries; many factories and family-run cottage industries were set up. Related industries also thrived in the area, such as the fabric shops in Wong Chuk Street and Yu Chau Street, button and embroidery shops in Nam Cheong Street, etc.

Central Sham Shui Po was once an important military site as well. In 1927, Sham Shui Po Barracks was in the vicinity of the current Lai Kok Estate and Sham Shui Po Park. In 1941, during the Japanese occupation of Hong Kong, the barracks was used as a prisoner-of-war camp, where the Japanese army kept 7,000 captives, including British and Canadian soldiers. After the war, it again became a barracks, until its closure in 1977. Subsequently the former barracks became a closed camp for Vietnamese refugees. At present, there are still stone columns (boundary stones) with ‘boundary of military zone’ and memorial plaques near or in Sham Shui Po Park.