APPD Market Report Article

Hong Kong

May 26, 2024

Cathie Chung, Senior Director, Hong Kong


HKD 13.4


Downsizing cases from domestic and trade-related sectors emerge

  • A few third-party logistics operators returned space upon lease expiry, increasing vacant space by approximately 331,000 sq ft (GFA). Meanwhile, a domestic houseware brand plans to downsize and relocate its current warehouse in Kwai Chung from a ramp-access facility to a space with a more affordable rents in Fanling.
  • Among the limited new leases, Rhenus Warehouse Solutions committed to a total of 178,753 sq ft (GFA) at Goodman Westlink in Tuen Mun. Newport Express, on the other hand, committed to 33,949 sq ft (GFA) at ATL Logistics Centre in Kwai Chung. According to market news, an electronics-related operator also leased 34,380 (GFA) at China Travel Hip Kee Godown in Hung Hom.

Resurgence of available space outstrips stagnant leasing demand

  • The vacancy rate rose from 5.8% in 4Q23 to 7.3% in 1Q24.
  • A cluster of new logistics centres near the airport is set to come on stream between 2025 and 2028, providing at least 642,000 sq ft of GFA. The HKIA Transit Mail Centre, developed by the Hong Kong Airport Authority, will be completed in 2025. Hong Kong Post’s Air Mail Centre Redevelopment will follow in 2027, with the UPS’ and Airport Authority’s joint project to be finished in 2028.

A glum investment market is the central narrative in 1Q24

  • Investment volume (over USD 5 million, excluding equity and land deals) sank significantly, by 87.4% q-o-q in 1Q24.
  • Notably, Hong Kong Economic Times Holdings sold multiple units in Tai Ping Industrial Centre Block 1 in Tai Po for HKD 135.0 million (HKD 3,248 per sq ft, GFA) to China Mobile Hong Kong with a sale-lease back arrangement to occupy a flat on the roof of the sold property.

Outlook: Trajectory for vacancy rate to remain upward

  • Downward rent pressure is expected to continue, owing to the growth of marketable space and the loosening of warehouse demand from both the trade and domestic markets in early 2024. Storage demand is expected to recover once consumption sentiment improves, particularly following the materialisation of the anticipated rate cuts and the gradual recovery of mainland China. 
  • Mild yield expansion is anticipated in 2024, with a cautious rent and occupancy outlook.

Note: Hong Kong Logistics & Industrial refers to Hong Kong's industrial warehouse market.

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