Hong Kong Tops Global Logistics Hubs for Lowest Prime Yields

CBRE’s Global Industrial & Logistics Prime Yields report reveals that the Asia Pacific market accounted for two of the top 10 global logistics hubs in 2018, with Hong Kong ranking first (3.40%) and Tokyo ranking third (3.90%) for lowest prime yields—indicating high property values.

Investor demand for high-quality industrial and logistics assets in Asia Pacific remains robust on the back of strong user demand and the development of modern facilities into an institutional investment product. With strong investment flows to the Asian logistics sector, the average logistics yield fell to 5.97% in 2018. At 3.4%, Hong Kong had the lowest prime yield of all markets surveyed, down 30 bps from 2017. Tokyo Bay Area followed closely behind with a 3.90% prime yield, down 10 bps year-over-year. 

Tom Gaffney, Regional Managing Director, CBRE Greater Bay Area and Hong Kong said, "Industrial and logistics properties are among the most sought-after asset classes in Hong Kong. Within this category, data centers are the rising in prominence, fuelled by strong demand for data storage in both traditional and new industries. This year, we expect to see further demand from high-end users like specialty goods logistics providers as well as tech companies. The potential relaunch of the industrial revitalisation scheme will spur more en-bloc transactions for redevelopment. We expect bullish demand, coupled with low vacancy to boost industrial property capital values in Hong Kong by up to 5% in 2019.” 

The report also reveals that rapid e-commerce growth and the modernization of logistics assets is attracting an abundance of institutional capital to global industrial real estate, pushing investment yields close to record lows—47 of the 63 markets tracked by CBRE recorded lower yields in 2018 when compared to the previous year. 

"The logistics sector continues to benefit from structural changes, such as online retailing and evolving consumer behaviors, transforming global supply chains. E-commerce operators require up to three times more space than traditional warehouse users due to a greater diversity in products handled and the need to have them immediately accessible. Global investors have caught on and are keen on adding industrial assets to their portfolios," said Jack Fraker, Global Head of Industrial & Logistics, Capital Markets, CBRE.

For 2019, global prime logistics yields are expected to hold steady as the appetite for core industrial assets continues.

Prime Logistics Yields by Market, Year-over-Year Change, Q4 2018
Ranked by Lowest to Highest Yield (%), Top 10 per region

Rank	Market	Prime Yield (%) Q4 2018	Change (BPS)	Country	Region
1	Hong Kong	3.40	-30	Hong Kong, China	APAC
2	Vancouver	3.75	-50	Canada	Americas
3	Tokyo	3.90	-10	Japan	APAC
4	Germen Hubs (Frankfurt, Munich and Berlin)	4.00	-40	Germany	EMEA
5	Inland Empire	4.00	0	U.S.	Americas
6	London	4.00	-35	U.K	EMEA
7	Los Angeles/Orange Country	4.00	0	U.S.	Americas
8	New Jersey	4.00	-25	U.S.	Americas
9	Oakland	4.00	-25	U.S.	Americas
10	Seattle	4.00	0	U.S.	Americas