What does Hong Kong warehouses’ ultra low vacancy rate mean for the industry? | Real Estate Asia
, Hong Kong

What does Hong Kong warehouses’ ultra low vacancy rate mean for the industry?

The vacancy rate is at sub-1% as of H1 2022. 

Supported by tight supply and strong growth in external trade and domestic consumption in 2021, JLL says the vacancy rate of Hong Kong’s warehouses hovered at an extremely low level of about 1%. 

“Vacancy rate edged down even further in the first half of 2022, despite a moderation of trade growth and the Shanghai lockdown caused by a renewed COVID-19 outbreak,” said JLL’s Sandy Au.

Here’s more from JLL:

The persistently low vacancy level reflects the resilience of demand for storage spaces, much of which came from domestic operators since the pandemic. The same is observed in the flatted factories segment that caters to SME tenants, who often prefer flatted factories over prime warehouses for goods storage.

Compared to prime warehouses, units in flatted factories are relatively small. This provides more flexibility and scalability for tenants to expand or consolidate their lease of spaces in tandem with their storage requirements. The other consideration for SME tenants is that many flatted factories are located in or around the city, while prime warehouses are normally near the HK-China border, airports and ports. 

The urban location allows operators to reduce delivery time and cost to retail stores, restaurants or residences. According to the Hong Kong Government’s Planning Department, warehouse/storage took up 48.8% of the total floor area of industrial buildings in the city, being the most popular usage for industrial space among other purposes, such as offices and food factories.

Notwithstanding the stable demand in flatted factories, the lack of maintenance and the ongoing revitalisation scheme reduced the commercial space available in the market. Over 65% of industrial buildings are built before 1987, and their specifications may not be meet current storage requirement, in terms of floor loading and ceiling height. 

While most of the flatted factories are in urgent need of refurbishment or repair, only premises located in areas near the port or border will likely be revamped. Those outside the area are more likely to be demolished and redeveloped for residential or commercial usage, leading to the further shrinkage of potential storage spaces for operators.

The current government policy called Revitalisation Scheme 2.0 has accelerated the process. As of today, about 50% of GFA in the flatted factories has been approved to change its use into office. The 29% of the stock that will be redeveloped will likely be built as modern industrial. The building specification of these modern assets will be closer to an office than a warehouse as the former may fetch better rents and, therefore, more attractive returns.

It is expected that the domestic demand for storage in the metro area will continue to grow, given the rise of e-commerce and mini-storage. This comes at a time when flatted factory stock is diminishing. Taking this in consideration, the government needs to strike a balance between redevelopment and preserving the flatted factories. 

Incentives can be given to premises owners to encourage refurbishment. For example, allowing commercial use for certain floors in refurbished flatted factories with land premium exempted/reduced while the rest of the floors will be kept for storage use. The initiative will allow building owners to get a better return while the storage spaces in the metro area can be maintained.

 

Follow the links for more news on

Join Real Estate Asia community
Since you're here...

...there are many ways you can work with us to advertise your company and connect to your customers. Our team can help you dight and create an advertising campaign, in print and digital, on this website and in print magazine.

We can also organize a real life or digital event for you and find thought leader speakers as well as industry leaders, who could be your potential partners, to join the event. We also run some awards programmes which give you an opportunity to be recognized for your achievements during the year and you can join this as a participant or a sponsor.

Let us help you drive your business forward with a good partnership!

Exclusives

How Metland Indonesia deals with weaker residential purchasing power
The real estate firm continues to expand with residences that are attractive to consumers because of pricing, the ‘growing house’ concept, and sustainable features.

Event News

Event News

Real Estate Asia Awards 2023 Winner: Henderson Land Development Company Limited
Henderson Land Development Company Limited wins big at the Real Estate Asia Awards 2023 taking home 3 notable accolades, the Developer of the Year, Mixed-Use Development of the Year, and Residential Development of the Year awards for Hong Kong.
Real Estate Asia Awards 2023 Winner: Henderson Land Development Company Limited
Henderson Land Development Company Limited wins big at the Real Estate Asia Awards 2023 taking home 3 notable accolades, the Developer of the Year, Mixed-Use Development of the Year, and Residential Development of the Year awards for Hong Kong.