Article | Future Cities
Navigating the Future of Industrial Land Sales in Hong Kong
March 24, 2025
Contact
The article intends to provide a comprehensive analysis of the industrial land market in Hong Kong, highlighting the challenges and opportunities facing developers and the government. Also raise important questions about the government's approach to managing the supply of industrial land.
The recent sale of Tsing Yi Town Lot No. 202 (TYTL No. 202) to Mapletree has marked a significant milestone in the industrial land market, despite being the only bidder. The premium of HK$3,678,600,000 represents an accommodation value of HK$ 1,499/sq. ft. (based on its maximum GFA of 2,454,427 sq. ft.). This strategic acquisition underscores Mapletree's commitment to expanding its logistics presence in the region. With a well-established logistics centre situated adjacent to the site, Mapletree is poised to capitalise on existing tenant demand for expansion or upgrade opportunities.
Figure 1: TYTL No. 202 Site Detail
TYTL No. 202 boasts an excellent configuration, with minimal non-building areas allowing for maximum site coverage. Assuming a 60% site coverage ratio, the building could offer approximately 250,000 sq ft GFA per floor. Despite the public vehicle parks can be located in the basement to create more GFAs for logistics purpose, the developer must carefully consider the costs associated with basement construction to ensure financial viability.
Hong Kong's Kwai Chung and Tsing Yi areas are widely regarded as prime logistics hubs, benefiting from their strategic location and highway connections. With rental levels currently standing at HK$15 per sq ft (GLA), and considering overall costs, the site is expected to generate a gross yield of 5% on cost.
The decline in land prices has been driven by a combination of factors, including a soft leasing market and shifting market risk profiles. High interest rates and construction costs remain significant hurdles for developers. As such, it is challenging to directly compare the previous land sale in Kwai Chung Town Lot No. 531 (KCTL No. 531), given the changed market dynamics.
The Lands Department has made significant improvements to the conditions of sale, removing unnecessary uncertainties and facilitating the transaction. For example, basement Public Vehicle Parking (PVP) and queuing spaces for other car parking are GFA exempted. This has been a welcome development, particularly in light of the current market conditions.
In addition to the TYTL No. 202 sale, there are several potential sites in the area, totalling approx. 13.9 million sq. ft. (GFA), subject to the government's land sale schedule.
Figure 2: Potential supply near the container ports
The Northern Metropolis (NM), among the 72 hectares of land in Hung Shui Kiu/Ha Tsuen New Development Area (HSK/HT NDA) and Yuen Long South Development Area (YLSDA) reserved for industrial and logistics uses, the majority (69 hectares) have been earmarked for development of MSBs for modern industries to support various industrial uses, including logistics and port back-up uses, vehicle repairing and maintenance, construction of modular integrated construction units and modern manufacturing, etc. When combined with the Northern Metropolis potential logistics sites, there will be approximately 76 million sq. ft. (GFA) on the pipeline for the next two to three decades. It is essential that the government manages the supply of industrial land to avoid over-supply issues in a wrong cycle.
The upcoming Yuen Long (Yuen Long Town Lot (YLTL) No. 545) and Hung Shui Kiu (Hung Shui Kiu Town (HCKT) Lot No. 10) Multi-storey Buildings for Modern Industries (MSBs) sites, originally scheduled for release on 21 March 2025, have been postponed till 25 July 2025. For YLTL No.545, this is the third time it has been delayed. Considering at least 48 months to 60 months of the development period, they will be only entered to the market around 2030+ , if the sites can be sold within 2025.
To accommodate brownfield operators, which induce 31 million sq. ft. underlying demand for potential industrial properties, the government should consider disposing of these sites via open tender on a rolling basis within the proposed term (i.e. 6 months term to submit and the Lands D has a right to choose the best proposal whenever it is identified), rather than fixed deadlines. This would allow developers to submit non-financial proposals with more efforts and demonstrate their willingness to contribute to the community.
Based on 20 March 2025 Government press release, the revised condition will scrap out "hand back its ownership" of Government Accommodation (GA) space upon completion. The government will lease the GA space for a long term (i.e.10 years) with a normal rent of $1, allowing developers to maintain full undivided share. This would be a win-win situation, providing the government with a stable space for its sub tenants (e.g. brownfield operators) while allowing developers to maintain control over their assets.
In 2024, the annual gross industrial leasing activity totalled 3.3 million sq. ft (5.2% yoy). Mainly driven by the expansionary demand from 3PLs and e-commerce players, such as Pinduoduo and Cainiao. Demand is gradually improving, and higher-quality options are expected to attract more newcomers to the city.
Figure 3: Gross New Lasing Volume (mil sq. ft. NFA)
To manage the overall supply of industrial land, the government should consider not only land sales and direct grants but also other pockets from HKSTP, HSITP, and HKAA to harmonise the different needs within the city.
By adopting a more flexible and collaborative approach, the government can ensure a balanced supply of industrial land, driving economic growth and development in the region.
The recent sale of Tsing Yi Town Lot No. 202 (TYTL No. 202) to Mapletree has marked a significant milestone in the industrial land market, despite being the only bidder. The premium of HK$3,678,600,000 represents an accommodation value of HK$ 1,499/sq. ft. (based on its maximum GFA of 2,454,427 sq. ft.). This strategic acquisition underscores Mapletree's commitment to expanding its logistics presence in the region. With a well-established logistics centre situated adjacent to the site, Mapletree is poised to capitalise on existing tenant demand for expansion or upgrade opportunities.
Figure 1: TYTL No. 202 Site Detail
TYTL No. 202 boasts an excellent configuration, with minimal non-building areas allowing for maximum site coverage. Assuming a 60% site coverage ratio, the building could offer approximately 250,000 sq ft GFA per floor. Despite the public vehicle parks can be located in the basement to create more GFAs for logistics purpose, the developer must carefully consider the costs associated with basement construction to ensure financial viability.
Hong Kong's Kwai Chung and Tsing Yi areas are widely regarded as prime logistics hubs, benefiting from their strategic location and highway connections. With rental levels currently standing at HK$15 per sq ft (GLA), and considering overall costs, the site is expected to generate a gross yield of 5% on cost.
The decline in land prices has been driven by a combination of factors, including a soft leasing market and shifting market risk profiles. High interest rates and construction costs remain significant hurdles for developers. As such, it is challenging to directly compare the previous land sale in Kwai Chung Town Lot No. 531 (KCTL No. 531), given the changed market dynamics.
The Lands Department has made significant improvements to the conditions of sale, removing unnecessary uncertainties and facilitating the transaction. For example, basement Public Vehicle Parking (PVP) and queuing spaces for other car parking are GFA exempted. This has been a welcome development, particularly in light of the current market conditions.
In addition to the TYTL No. 202 sale, there are several potential sites in the area, totalling approx. 13.9 million sq. ft. (GFA), subject to the government's land sale schedule.
Figure 2: Potential supply near the container ports
The Northern Metropolis (NM), among the 72 hectares of land in Hung Shui Kiu/Ha Tsuen New Development Area (HSK/HT NDA) and Yuen Long South Development Area (YLSDA) reserved for industrial and logistics uses, the majority (69 hectares) have been earmarked for development of MSBs for modern industries to support various industrial uses, including logistics and port back-up uses, vehicle repairing and maintenance, construction of modular integrated construction units and modern manufacturing, etc. When combined with the Northern Metropolis potential logistics sites, there will be approximately 76 million sq. ft. (GFA) on the pipeline for the next two to three decades. It is essential that the government manages the supply of industrial land to avoid over-supply issues in a wrong cycle.
The upcoming Yuen Long (Yuen Long Town Lot (YLTL) No. 545) and Hung Shui Kiu (Hung Shui Kiu Town (HCKT) Lot No. 10) Multi-storey Buildings for Modern Industries (MSBs) sites, originally scheduled for release on 21 March 2025, have been postponed till 25 July 2025. For YLTL No.545, this is the third time it has been delayed. Considering at least 48 months to 60 months of the development period, they will be only entered to the market around 2030+ , if the sites can be sold within 2025.
To accommodate brownfield operators, which induce 31 million sq. ft. underlying demand for potential industrial properties, the government should consider disposing of these sites via open tender on a rolling basis within the proposed term (i.e. 6 months term to submit and the Lands D has a right to choose the best proposal whenever it is identified), rather than fixed deadlines. This would allow developers to submit non-financial proposals with more efforts and demonstrate their willingness to contribute to the community.
Based on 20 March 2025 Government press release, the revised condition will scrap out "hand back its ownership" of Government Accommodation (GA) space upon completion. The government will lease the GA space for a long term (i.e.10 years) with a normal rent of $1, allowing developers to maintain full undivided share. This would be a win-win situation, providing the government with a stable space for its sub tenants (e.g. brownfield operators) while allowing developers to maintain control over their assets.
In 2024, the annual gross industrial leasing activity totalled 3.3 million sq. ft (5.2% yoy). Mainly driven by the expansionary demand from 3PLs and e-commerce players, such as Pinduoduo and Cainiao. Demand is gradually improving, and higher-quality options are expected to attract more newcomers to the city.
Figure 3: Gross New Lasing Volume (mil sq. ft. NFA)
To manage the overall supply of industrial land, the government should consider not only land sales and direct grants but also other pockets from HKSTP, HSITP, and HKAA to harmonise the different needs within the city.
By adopting a more flexible and collaborative approach, the government can ensure a balanced supply of industrial land, driving economic growth and development in the region.