APPD Market Report Article
Hong KongMay 31, 2022
Growth in aggregate trade volume slowed down
- The aggregate trade volume grew moderately compared with the previous quarters. The total external trade increased by 9.3% y-o-y (YTD-February), with total imports and exports climbing by 8.1% and 10.6% y-o-y, respectively. Demand from trade-dependent operators appeared to have slightly slowed entering into 2022.
- The shift from offline shopping to online retail amid the tightening of social distancing measures bolstered the e-commerce sector and their demand for warehouse space, driving down the vacancy rate.
Completion delayed, vacancies edged down further
- Originally slated for completion in 1Q22, the completion date of Goodman Westlink in Tuen Mun was delayed due to epidemic-related issues. There were no further updates on the timing of expected completion.
- The vacancy rate edged down from 1.5% to 0.9% with an estimated availability of 520,000 sq ft as of end-1Q22.
Rents and capital values increase
- Warehouse occupiers, notably the online retailers, were active in taking space in anticipation of robust demand. As marketable space shrank, landlords raised the effective rents with shortened rent-free periods. Nonetheless, the level of leasing activities slowed slightly as the fifth wave of the COVID-19 hit. Overall, effective rent grew by 1.5% q-o-q in 1Q22.
- The investment momentum was sustained despite the COVID-19 outbreak. One notable en-bloc transaction was Telecom Digital’s purchase of Wider Industrial Building in Kwun Tong from Tang Shing Bor family for HKD 733 million for self-use and long-term investment purposes.
Outlook: Investment momentum expected to continue in 2022
- The warehouse sector is expected to be supported by the low vacancy level and surging demand coming from online businesses as well as the need to store medical supplies – a COVID-19-induced demand. These are likely to more than offset the moderation in the external trade sector.
- Market yield is expected to be slightly compressed. Investors with operating platforms are keen to seek assets suitable for re-purposing although potentially higher funding costs and the current wave of epidemic are causing some pauses.