Hong Kong warehouse prices to decline 3% in 2021

New demand is likely to be tempered until China’s borders are fully reopened.

Despite the overall property market being hampered by COVID-19 and Sino- US trade war, the performance of the industrial sector remained relatively resilient, with overall rents witnessing only modest declines. Colliers reveals that warehouses fell -5.6% YOY with factories falling -3.3% YOY in 2020. Tenants had a greater tendency to relocate for lower rents, while landlords were more flexible in offering incentives and longer rent-free periods to maintain occupancy.

In 2021, Colliers expects to see the total export performance to recover from 2020’s low base, supported by the recovery of exports to China. In fact, total export growth returned in Q3 and Q4 2020, after experiencing six consecutive quarters of negative growth. Meanwhile, in December 2020 the Tuen Mun – Chap Lap Kok link opened, greatly enhancing logistics connectivity in the northwest New Territories. “We expect to see the Tuen Mun area capture new interests from both occupiers and investors. Overall, in 2021 we forecast warehouse rents to decline by 2.5% and prices by 3.0% YOY, as new demand may still be relatively limited until the border with China is fully reopened.”

Here’s more from Colliers:

Data centres and cold storage facilities continued to gain traction in acquisitions and investment enquiries in the industrial sector. With working- from-home and the rise of 5G, corporates and investors are increasingly eyeing data centres as an integral asset class with capital growth potential. Most notably, an en-bloc data centre property with an area of 228,000 sq ft (21,200 sq m) at Kin Chuen Street (Kwai Chung) was rented for HKD30 per sq ft GFA /month (USD3.8 per sq ft GFA/month). This en-bloc leasing transaction, and the premium rental level has reinforced confidence in the industrial subsector.

Meanwhile, increasing supermarket and fresh food consumption boosted cold storage demand. In Q3 2020, Angliss Hong Kong Food Service Ltd. sold an en-bloc cold storage building at 47 Kwai Chung Cres in a sale and leaseback deal to HSBC Holding’s insurance arm for a lump sum of HKD325 mil (USD41.7 mil) priced at HKD4,995 per sq ft (USD640 per sq ft). Investors will likely continue to be attracted to this sector due to the income growth prospect, and the increasing e-commerce and F&B demand.