Industrial market's big-time deals crashed 56% to just 10 transactions

It's worth a tad over HK$30m.

Industrial market sentiment remained subdued, with ten major transactions (over HK$30 million) recorded in Q2/2014, a 27% and 56% decline when compared with last quarter and a year ago respectively.

According to a research report from Savills, nevertheless, despite a decrease in volumes, values in fact doubled quarter-on-quarter, reflecting higher value properties (mainly en bloc) being pursued by both investors and end users.

Besides Goodman’s purchase of the redevelopment site in Tsuen Wan, a number of significant deals were closed over the quarter.

Both blocks of Harrington Building in Tsuen Wan (223,800 sq ft) were sold to Bonjour Cosmetics for HK$490 million (HK$2,189 per sq ft) for partial owner occupation and partial investment, while Law’s Property bought Nan Sing Industrial Building (119,170 sq ft) in Kwai Chung for HK$382 million (HK$3,206 per sq ft) eyeing its redevelopment potential.

Here’s more from Savills:

Revitalisation has long been the driving force of the industrial market but the relatively long payback period (several years of incremental rents to pay back the initial outlay on refurbishment) has been the stumbling block for many.

Recently, Tai Cheong had an innovative idea to solve this problem: In 2012, they received revitalisation approval to turn Metropole Square in Shek Mun into offices. Instead of launching the project for lease they will stratify the property with asking prices of around HK$6,000 per sq ft per floor.

The only catch is that each strata-owner has to sign a consent letter for the revitalisation executed in 2012, meaning that while the ownership may be stratified, there will always be 100% owner consent for the revitalisation and thus no revitalisation requirements are violated.

If the project is successfully sold, this will vastly shorten the payback period for a revitalised project and thus may increase its attractiveness to other landlords.