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Weekly snippet | All eyes on industrial investment opportunities

Hong Kong real estate investment was comparatively subdued in 2020, with institutional investors and funds adopting a safety-first approach and choosing to see out market uncertainty before committing any capital. Keeping a diligent view of the market, Colliers’ research identified industrial assets – specifically data centres and cold storage – and overall growth in activity in China as areas to watch at the start of the year.

As the first quarter of 2021 moves past the halfway mark, we’ve seen some of these indicators ring true with industrial investment seeing early signs of activity along with positive economic movement for Hong Kong against the back improved GDP performance in China. Providing a quick overview of what’s being witnessed on the ground, we hear from two of our leading brokers, Kitty Zhang, Assistant Manager, Industrial Services and Pureanae JangValuation & Advisory Services, in this week’s snippet.

Industrial

Recently, working with major industrial landlords, we’ve seen an increase in activity from occupiers actively seeking properties, and from investors looking for assets or available land to purchase and redevelop. There is an increase in interest and intent from last year which provides optimism for the industrial sector, especially for assets that will provide a solution to Hong Kong’s needs of increased data storage and logistic solutions.

A good example can be seen with Goodman as they acquired half ownership of Seapower Industrial Centre (117,381 sq. ft.), an industrial building situated at 177 Hoi Bun Road in Kwun Tong with a purchase price of HK$570 million. This acquisition includes the ground floor, to fourth floor, accounting for 49% of the ownership. Most of the space will be used for cold storage, and the rest will be general warehouse solutions. Whilst Goodman is a leading manager of logistics and industrial properties in Hong Kong, all the buildings they previously owned are in the New Territories, with this being their first asset in the Kowloon district.

Valuation & Advisory Services

Link Asset Management Limited (Link), the manager of Link REIT, announced on 24 February that it has agreed to acquire 50% interest in Shanghai Qibao Vanke Plaza in Shanghai for RMB2.77 billion. According to the announcement, the monthly passing income of the Property (excluding management fees) was approximately RMB32.8 million, reflecting a gross initial yield of about 6.1%. The Property is a 5-storey commercial development plus a 3-storey basement located at Qibao Town, Minhang District in Shanghai. Completed in September 2016, it comprises a retail area of approximately 148,850m² and 1,471 parking spaces. The Property is directly connected to Qibao metro station and is a regional destination for commuters.

Shanghai has witnessed the fastest retail recovery from the COVID-19 pandemic among the four Tier 1 cities in Mainland China. According to the announcement, despite the pandemic, the property has a 97.8% occupancy rate as at end of December 2020. The Link’s acquisition shows strong investment confidence in China’s retail market. The EIU has projected Shanghai’s total retail sales of consumer goods will post an average of 5.2% annual growth between 2021 to 2023.

If you would like to know more about the market, or what options face you as a real estate professional or occupier in Hong Kong, don’t hesitate to contact our experts to see how we can help accelerate the growth of your business.