Despite the fact that the US-China trade war has cast a shadow over Hong Kong's economy, the industrial property sector appears to be a bright spot, according to global real estate consultancy JLL. Lusail | lusail Qatar | property hunter
Demand for industrial property remained largely unchanged in May, driven by logistics companies' expansion needs. Many major transactions were registered. In the leasing industry, Geodis grew in Tuen Mun's YKK Building Phase 2, taking up the entire 19th floor (34,100 sq ft). Meanwhile, Laws Property Group is said to have purchased an industrial building at 822 Lai Chi Kok Road in Cheung Sha Wan from Hang Lung Properties for HKD 1.4 billion (HKD 14,870 per sq ft), with plans to renovate it into an industrial, retail, and commercial property. The sector appears to be benefiting from the government's plan to revitalize older industrial buildings, as shown by these recent transactions.
JLL's Head of Research, Denis Ma, says, "Despite the macro-environmental uncertainties, investors continue to be drawn to the market by the growth potential of older industrial assets that are suitable for revitalization. The areas with the most concern are those with a large housing supply and those that are experiencing gentrification. This is one of the main reasons why we anticipate a 5% increase in the capital value of industrial assets "in the year 2019."
In May, net absorption of 1.47 million square feet was reported in the office leasing market. However, the realization of pre-commitments in newly constructed buildings was responsible for a large portion of the increase. Net absorption was 196,400 square feet, except the effect of new production. Tenants tended to search out cost-effective alternatives, but leasing activity remained concentrated in decentralized areas. FTLife Insurance reportedly leased 94,500 sq ft at NEO in Kwun Tong, relocating from offices in Sheung Wan, as one of the more prominent transactions.
Overall, market rents rose 0.3 percent month over month in May, with Tsimshatsui and Hong Kong East leading the way. The highest gains were seen in Hong Kong East, where rents increased by 1.4 percent month on month as the vacancy rate fell to 1.5 percent at the end of May, the lowest among all districts.
JLL's Head of Markets, Alex Barnes, also had something to say about it: "While vacancy rates have risen due to a recent downturn in leasing activity in Central, we continue to see active expansion requirements from a smaller segment of the finance and legal sectors. As a result, any pressure on landlords to lower rents substantially in the coming months will be limited to a few buildings with a higher probability of vacancy."