Warehouse rents in Hong Kong predicted to jump 4%

That's over the next 12 months.

According to Colliers International, looking forward, warehouse rents are expected to see a softer growth of 3 – 4% over the next twelve months. In anticipation of the much slower rental growth, there is limited room for further price growth in industrial properties over the near term.

Here's more from Colliers:

In 2Q 2013, there are weakening signs in the performance of Hong Kong’s industrial property market. Warehouse rents have experienced a vibrant growth of 20% yearon-year over the past two years, but they started to taper in 2Q 2013.

According to Colliers International’s Hong Kong Industrial Market Research & Forecast Report 2Q 2013, the warehouse rental growth slowed to 1% quarter-on-quarter (QoQ) in 2Q 2013 from 5% QoQ Simon Lo, Executive Director of Research & Advisory, Asia at Colliers International explained that the slowing rental growth was due to the weakening performance in retail sales and total exports. 

Although rental escalation eases a little, the expensive rents of prime warehouse properties have triggered a new round of relocation activities. Lo says, “Tenants, who cannot afford soaring rents in prime premises in Kwai Chung, chose to relocate to other districts such as Tuen Mun and Yuen Long for cost savings, while those strong logistics companies have taken the prime spaces to consolidate their operations under one roof and enjoy improvement in operation efficiency.”

Meanwhile, the industrial property sales market was sluggish in 2Q 2013. “The cut in loan-tovalue ratio and the doubling of stamp duty has discouraged investment demand, particularly those marginal players and short-term investors. Consequently, both transaction activities and prices have experienced downward pressure,” Lo comments.

The number of strata-title industrial property sales transaction plunged 69.5% QoQ between March and May 2013, hitting the lowest level since 2Q 2009.

And according to the government’s statistics, the price growth of private flattered factories slowed from 12.5% QoQ in December 2012 to 2.1% QoQ as of May 2013, and the industrial property yield lingered at 2.6 - 2.7% during February to May 2013, which was an all-time low since 1991. Yet the en-bloc sales market performance was relatively resilient.

There were eight en-block industrialproperty transactions recorded between March and May 2013. The most notable transaction was the acquisition of Kian Dai Industrial Building in Kwun Tong by Partners Group and Pamfleet for HK$980 million.