Hong Kong industrial rents to drop by 2-3% next year

Demand is expected to be weak in 2025.

In 2024, Hong Kong’s industrial market faced challenges, with overall vacancy reaching a record high of 8.2%. Nathan Chan, Knight Frank Director and Head of Industrial & Logistics Services, said vacancy rates for Modern Logistics facilities and general industrial buildings increased to 9.4% (up from 8.2% in Q4 2023) and 6.6% (up from 3.5% in Q4 2023), respectively.

“This was largely due to Third-Party Logistics (3PLs) scaling back operations amid economic uncertainty and a downturn in the retail and F&B sectors, which undermined leasing demand,” he added.

Here’s more from Knight Frank:

Rent levels for both Modern Logistics and General Industrial properties dropped slightly in 2024, by 4.2% and 2.5%, respectively. One shrinking sector is cold storage; increased spending by Hong Kong residents in Chinese mainland has reduced demand for frozen food, leading to more lease surrenders among cold storage operators.

Despite these challenges, we expect demand from the e-commerce and electric vehicle sectors to rise in 2025. Online shopping is becoming more prevalent, and e-commerce platforms like Taobao, JD, and HKTV mall are expanding their investments in Hong Kong. Additionally, the entry of more EV brands will boost demand for ground-floor workshops.

In conclusion, we anticipate weak demand in the industrial and logistics sectors, with rents for Modern Logistics and flatted factories expected to drop by 2% to 3% in 2025.