Strata-titled industrial sales hit $4.7b in 2Q14

Vendors had a change of heart.

Strata-titled industrial sales increased in 2Q 2014 as the price expectation gap reduced and vendors became more negotiable in their pricing.

According to a research and forecast report from Colliers International on 2Q 2014, during the period from March to May 2014, the total value of industrial properties transacted was HK$4.7 billion, up from HK$3.3 billion in 1Q 2014.

Nevertheless, the level of sales activity is yet to return to the long-term average of HK$5.3 billion per quarter.

Activity in the en bloc market remained slow during the quarter due to limited stock availability and double stamp duty measures remaining in place.

Here’s more from Colliers International:

The market has, however, witnessed increased enquiries in relation to properties offering

a higher rate of return via building conversions, repositioning and tenant mix restructuring.

An example of this is a local family which acquired the en bloc Keng Sing Industrial Building in

Kwai Chung for HK$210 million (an average price of HK$4,601 per sq ft) after the vendor obtained Government permission to revitalise the building for office and retail use.

The price tag was above those of nearby strata-titled premises which transacted in a range of about HK$2,500 – HK$3,000 per sq ft.

Downside risks as a result of the anticipated interest rate rise, the doubling of stamp duty measures and already high prices will continue to weigh on investors' minds.

Individual property owners have become more negotiable in pricing, with some vendors disposing their premises at a loss.

Private investors with strong liquidity positiions seeking long-term investment opportunities in the industrial property market, as these premises offer a higher rate of return when compared with other property types.

In addition to this investor group, end-users continue to look for industrial premises as supply reduces.

A notable transaction recorded this quarter was the acquisition by a seasoned local investor of a logistic warehouse floor - Sunshine Kowloon Bay Cargo Centre which included 8 loading/unloading bays in Kowloon Bay.

The deal has an estimated market yiel of about 4% per annum as of June 2014.

We believe ramp access warehouse and industrial properties with high ceiling heights will contonue to be sought after by end-users, as these premises are suitable for a wide range of users.

The sustained demand from end-users coupled with low supply levels will support industrial property prices remaining stable for the remainder of 2014.