Warehouse vacancy inches up to 4.4% in H1

Market occupiers also continue to be cautious.

In Hong Kong's industrial market, it has been observed that warehouse vacancy grew to 4.4% from 2.2% as at the end of 2015, mainly due to the completion of Mapletree Logistics Hub in March 2016.

According to a research note from CBRE, further, occupiers continued to be cost-cautious. Some of them were outsourcing their logistics functions to 3PLs.

Also, warehouse supply was limited, with only 3 projects totaling 4.3 million sq. ft. in the pipeline. The total value of trade in goods dropped by 2.9% in April and May combined, which is a relative improvement from the previous two quarters. I/O is competing with new office supply, thus I/O rental was under stronger pressure.

Here's more from CBRE:

2016 2H outlook: As global trade momentum is expected to further deteriorate, demand from both 3PLs and retailers will stay thin in 2H 2016. Activity will mainly be driven by cost-saving requirements. New space will benefit occupiers, but forced relocation is still possible.

Demand for space from mini-storage operators will be kept to minimal. Meanwhile, non-industrial usage in industrial buildings will become more difficult. Industrial rents will in general remain stable.