19 February 2013
Hong Kong’s industrial properties saw an encouraging performance in both leasing and sales market in 4Q 2012, according to Colliers International Hong Kong Industrial Research and Forecast Report.
Improving external trade helped drive the performance, with the total value of re-exports growing 7.4% YoY between September and November to HK$903 billion, after a 2.4% decline between June and August.
In addition, substantial retail sales continued to support warehouse demand. In the three month period ending in November 2012, retail sales grew 7.5% YoY to HK$106 billion. In order to capture the demand attributed to outsourcing at major corporations, a group of third-party logistics companies continued to look for quality warehousing premises, particularly those ranging from 30,000 to 50,000 sq ft.
Amidst the limited availability of quality stock, sustained demand from third-party logistics companies fueled the growth momentum of warehouse rents. Warehouse rental growth picked up as well, from 4.6-4.8% in the third quarter to 5.2-5.4% in the fourth quarter.
On the factory market front, more landlords opted to convert whole blocks of their industrial buildings to other uses in anticipation of potential rental income increase, similar to the previous quarter. As such, the relocation of those previous tenants looking for suitable premises with sizes similar to their existing properties, supported a 3.2% quarterly rise in factory rents, compared to 1.8% quarterly growth in 3Q 2012.
Similarly, rental growth for industrial/office buildings (I-O) accelerated from 1.8% in 3Q 2012 to 3.0% QoQ in 4Q 2012. The growth was primarily attributed to a spillover effect from sustained rental growth in decentralised office premises.
Meanwhile, the local industrial sales market was more active than the leasing market, with prices rising more strongly than rents.
“The sustained increase in industrial rents and low interest rate environment continued to attract end-users, especially small to medium-size companies and investors to acquire industrial premises for owner-occupation and investment purposes,” said Simon Lo, Executive Director of Research & Advisory, Asia at Colliers International.
Lo added that the introduction of Buyer’s Stamp Duty and extension of the Special Stamp Duty in the residential market prompted some investors to focus on non-residential real estate, giving an additional boost to the industrial sales market.
The strata-title sales transaction volume of industrial properties surged to its highest point since 1999 during the last quarter of 2012. The total value of strata-title sales transactions rose 98.9% QoQ to HK$18,552 million and the number of strata-title transactions jumped 90.0% QoQ to 3,598 between September and November 2012.
Strong buying demand has also driven further growth in industrial prices. Industrial property prices increased 7.0 to 10.0% QoQ in 4Q 2012, compared to growth of 6.5 to 8.0% QoQ in the preceding three-month period.
In anticipation of growth in re-exports and Hong Kong’s economy, Colliers projects factory and I-O building rents to rise 8% in 2013. Warehouse rents are expected to see a double-digit increase, due to sustained end-user demand and a lack of new supply in 2013. In terms of prices, factory and I-O buildings are predicted to see 11% price growth in 2013 while for warehouses, the growth is expected to be more. The average industrial yield is expected to decline by 10 basis points this year.