APPD Market Report Article

Hong Kong

November 29, 2022

Nelson Wong, Executive Director, Hong Kong


HKD 13.3


Tenants remain cautious amid growing uncertainty

  • Total external trade has dropped by 12.4% y-o-y (Jul-Aug 2022), with imports and total exports falling by 13.1% and 11.7% respectively. The worsening global economy and moderation in China’s growth weighed on trade performance, leading to a contraction in both exports and imports.
  • The leasing market saw limited commitments despite recording several expansions. For example, Don Don Donki expanded and relocated to Goodman Dynamic Centre in Tsuen Wan, taking 87,822 sq ft to accommodate its growing business. Another notable example is Alba Integrated Waste Solutions, a recycling business operator, which committed 12,000 sq ft at Eastern Factory Building in Kwai Chung.

Vacancy rate continues to fall; new supply to come in 4Q22

  • Goodman Westlink (996,400 sq ft) is expected to complete in 4Q22, while the Cingleot Premium Logistics Centre (5,367,640 sq ft) is slated for completion in 2023.
  • The overall vacancy rate has dropped to 0.8% in the quarter, with approximately 0.45 million sq ft of vacant stock at the end of 3Q22.

Rents and capital values grow further

  • Given the extremely tight supply of warehouses, landlords were positioned more favourably, thus rent-free periods were shortened and effective rent pushed up by 2.0% q-o-q.
  • Despite the moderation in investment momentum, some institutional investors continued to look for quality industrial assets for long-term investment and business expansion. For example, Goodman acquired 72.35% interest in the Chuan Kei Factory Building in Kwai Chung from the Tang Shing Bor Family for HKD 520 million, to expand their operations.

Outlook: Upcoming completions to relieve tight availability

  • The external environment is expected to continue to adversely affect warehouse demand. Coupled with substantial new completions in the near horizon, the market is likely to see some relief in space availability. The long-standing low vacancy rate may see a mild rise in the following quarters as well as a moderation of rental growth.
  • The gradual normalisation in Hong Kong should boost investors’ longer-term confidence in the real estate market. Stalled investment plans will likely resume, with hotspots being industrial properties that offer the prospect of repurposing.

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

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