APPD Market Report Article

Hong Kong

August 26, 2022

Nelson Wong, Executive Director, Hong Kong


HKD 13.0


Strong leasing demand underpinned by air freight operators

  • The aggregate merchandise trade growth slowed to 2.2% year-to-May, with imports and total exports moving up by 2.4% and 1.9%, respectively. Given the rise in oil prices, most marine shipping companies will require their vessels to be fully-loaded before embarking, leading to delays in delivery time and a shift in demand to air freight.
  • The fifth wave of COVID-19 accelerated the growth of online grocery sales, boosting the demand for cold/chilled storage for fresh meat and vegetables. Space for ramp-access warehouses was further tightened in response to the surge in cold storage demand.

New supply postponed to 4Q22, vacancy remains low in short term

  • Goodman Westlink, initially slated for completion in 1Q22, is now expected to complete in 4Q22.
  • The overall vacancy rate hovered at 0.9% in the quarter with only 0.51 million sq ft of marketable space. For ramp-access warehouses, vacancy rate dropped to 0.7% from 1.0% during the quarter while the vacancy rate of lift-access warehouses moved in the opposite direction from 0.9% to 1.2%.

Rents and capital values continue to edge up

  • In 2Q22, occupier demand shifted from lift-access warehouses to ramp-access warehouses due to the high building specifications requirement for cold storage. The net effective rent for ramp-access climbed by 2.8% q-o-q while that for lift-access stayed flat. Overall, the net effective rent grew by 1.7% q-o-q.
  • The investment market continued to be active and sentiment was buoyed by several en-bloc transactions. Notably, Heitman bought New China Laundry Group Building in Fanling from New World Development for HKD 450 million, with a view to converting the building into a cold storage facility.

Outlook: Industrial assets to remain the hotspot

  • Without any new supply in sight until the year’s end, resilient demand for warehouses from the domestic sector such as online grocery and medical supplies will continue to keep vacancy rate capped at a low level. In light of the easing of Shanghai’s lockdown, trade performance is expected to gradually improve with the supply chain restored.
  • In spite of expected interest rate hikes, the investment momentum is only expected to be modestly affected. The re-purposing of industrial assets for alternate uses afford investors larger room in uplifting investment return via gains in operating profits.

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

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