Hong Kong industrial leasing demand to remain weak in the near term

The vacancy rate stood at 3.2% in Q3.

As the Hong Kong industrial market is continuously clouded by bearish sentiment, landlords have started to lower asking rents to draw tenants. According to Colliers, this led to a barely noticeable drop in general industrial and warehouse rents that still hover at HKD14.6 psf and HKD14.8 psf, respectively. 

Here’s more from Colliers: 

In line with tenants’ cautious outlook, we expect leasing demand to remain weak in the next few coming quarters. Instead of sticking to any expansion plans, most tended to renew existing leases or shed space, contributing to the trend of increased vacancies, which stood at 3.2% in Q3. 

In June 2023, the government called for an expression of interest in three industrial sites in Yuen Long. Given the scarcity of new industrial land, the proposition should have been appealing. However, onerous conditions on the sale could see them go for less than expected prices – if at all. We expect the lack of developer interest to exert downward pressure on near-term rents. 

Our whole-year general industrial rent growth forecast remains at 2%, while warehouse rent will likely experience a slight decline of 3% to 4% in 2023.