New letting uptick due to increasing Prime space availability

• Notable transactions included A&S Logistics leasing about 170,000 sq ft in Cainiao Smart Gateway in Chek Lap Kok, encompassing the previously committed 55,700 sq ft.
• In Q2 2024, downsizing was observed. For example, an international 3PL operator reportedly downsized and relocated to a smaller space of 39,100 sq ft (GFA) within the same district (Tsing Yi).

Vacancy rate reaches 7.9% in Q2 2024

• The vacancy rate edged upward with a negative absorption of around 530,000 sq ft (GFA).
• There was no new supply of Prime warehouses in Q2 2024.

Investment activities remain low in Q2 2024

• Some notable transactions included The Sincere Company’s disposal of a floor in Gemstar Tower in Hung Hom for HKD 210.0 million (HKD 5,214 per sq ft, GFA). The premises were reportedly purchased by Meka and will be for self-use.
• Meanwhile, Prowell International Trading spent HKD 225.3 million to acquire a basket of units in Global Commerce City 2 (now renamed Prowell Asia Centre) in Cheung Sha Wan, a modern industrial premises to be completed in H2 2024.

Outlook: Rent decline to continue throughout 2024

• Given the lacklustre recovery of trade and the unsustainable local consumption growth, the augmentation of vacant space should persist, and rent growth is expected to stay in the negative zone for an extended period.
• The sombre rental outlook and the higher-for-longer borrowing rates are set to remain major hindrances to investment activities, and are expected to send capital values lower in H2 2024, accompanied by a modest yield expansion.