APPD Market Report Article

Hong Kong

September 4, 2023

Cathie Chung, Senior Director, Hong Kong


HKD 13.5


A notable data centre lease has been signed

  • AirTrunk, which currently owns an enbloc data centre in Tsing Yi, expanded its data centre business in Hong Kong by committing a total GFA of 124,861 sq ft at San Miguel Industrial Building in Shatin until March 2039. This second data centre, HKG2, is expected to be completed in mid-2024, providing over 15 MW of total capacity.
  • The leasing market for prime warehouses continued to be dominated by renewals with more new demand from domestic and public markets. For example, JC Motors committed to the new space of 40,679 sq ft (GFA) in Sunshine Kowloon Bay Cargo Centre while Hospital Authority recently confirmed the leasing of 26,410 sq ft (GFA) at Kong Nam Industrial Building Block A in Tsuen Wan.

Vacancy rate down to 1.5% in 2Q23

  • The overall vacancy rate dropped from 1.9% in 1Q23 to 1.5% in 2Q23 while net absorption rose to about 232,000 sq ft in 2Q23.
  • Located in Chek Lap Kok, Cainiao Hong Kong Smart Gateway will officially open in the coming September, providing about 4,100,000 sq ft of GFA. Including the self-use portions, the estimated pre-commitment rate of the new facility was about 40% as at end-2Q23.

High interest rate leads to faltering investment appetite

  • Investment volume (over USD 5 million excluding equity and land deals) further contracted by 69% q-o-q in 2Q23.
  • Among the limited transactions, a whole floor at Wah Tung Godown in Yau Tong was sold to China Resources Land for HKD 140 million at HKD 5,661 per sq ft (GFA). Meanwhile, HSBC offloaded a basket of units at Kwong Sang Hong Centre in Kwun Tong as distressed properties for HKD 81 million, or HKD 3,967 per sq ft.

Outlook: Market yield is expected to expand further

  • Despite the current retreat in external trade, the occupier demand for prime warehouses is likely to be sustained by domestic and public demand, keeping the vacancy rate in the single-digit territory with modest growth in rental.
  • Investors are bound to remain conservative with limited investment activities, given the high financing cost. The reduction in capital inflow to the investment market is expected to push up the market yield by about 5–10 bps.

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

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