Hong Kong Industrial Sales and Leasing - Oct 2021(Savills)

Logistics leasing activity levels revived in Q3 with operators opting to renewal in order to minimize business disruption, while those with expansion needs were looking for relocation options.

• The revival of the local trading and retail sectors has meant that many logistics operators were keen to renew leases to avoid business disruption, while those with expansion demand chose to relocate. 
• Overall and modern warehouse rents continued to rebound by 2.1% and 2.5% in Q3/2021 respectively, while both overall and modern warehouse vacancy rates fell to 3.2% and 2.6% over the same quarter, after a small spike last quarter.
• Investment sentiment continued to revive in Q3 with 17 major deals of over HK$100 million concluded worth a total of over HK$7.3 billion.  While investment funds were still keen on the high yield logistics sector, we note more participation from logistics operators (for eventual owner-occupation) and developers (for redevelopment).
• With local and global supply chains both expected to continue to rebound, short-term logistics demand seems to be sustainable. Nevertheless, a total of 7 million sq ft of new warehouse space is scheduled to come on stream over the next two years, so far with little pre-commitment, and this will test market resolve when it arrives in 2022 and 2023. 
• The robust investment sentiment for warehouse assets so far this year has already pushed prices up and yields down.  With Revitalization Policy 2.0 extended for another three years, we expect industrial investment to refocus more on run-down industrial premises with redevelopment potential.

This article was originally published in https://www.savills.com.hk/