APPD Market Report Article

Hong Kong

December 1, 2021

-1.2%

HKD 12.4

Rents
Stable

Local demand bolsters leasing momentum

  • During 3Q21, the recovery on merchandise trade environment continued, underpinning the industrial sector. Aggregate trade value registered a steady YTD increase of 27.0% (Jan-Aug 2021), with total imports and exports rising by 28.1% and 25.9%, respectively.
  • Benefitting from the further lifting of social distancing restrictions and the Local Consumption Scheme, leasing transactions and inquiries rose visibly with occupiers from local grocery and FMCG sectors taking the lead.

Vacancy remains on a healthy level

  • No new supply was completed during the quarter, while the much-anticipated Goodman Westlink in Tuen Mun is expected to complete in 1H22.
  • Vacancy continued to stay at a healthy level of approximately 1.05 million sq ft (1.9%) as at end-3Q21, with the vacancy for ramp-access warehouses dropping from 2.6% in 2Q21 to 1.8% during the quarter.

Rents and capital values on an uptrend

  • The positive market outlook and competitive landscape for prime warehouse space had encouraged landlords to take a firmer stance on rents, especially those who enjoy lower vacancy rates compared with the market average. As a result, net effective rents rose 1.3% q-o-q, or HKD 12.4 per sq ft per month.
  • Investors’ appetite towards the industrial sector remained strong, although investment momentum dwindled. The Tang Shing-bor family had been one of the most active asset vendors in 3Q21. The family successively disposed East Asia Industrial Building in Tuen Mun and Central Industrial Building in Kwai Chung to China Resources Logistics and GDS for HKD 2,240 and 900 million, respectively.

Outlook: Demand to underpin positive rental outlook

  • The path to recovery is expected to continue, driven by strong local demand and improved trade environment. Therefore, rents are expected to continue the current upward trajectory and will rise about 5% in 2021. Nevertheless, a bigger-than-expected slowdown in the Chinese economy in 2022 may cast shadows on the sector’s prospects.
  • While the market yields are expected to compress further due to strong capital inflows and demand-supply tailwinds, we expect capital values to rise in the range of 5-10% in 2021.

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

Talk to us 
about real estate markets.