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LOGISTICS


LOGISTICS VACANCY REMAINS LOW DESPITE YEAR OF DISRUPTION

 

Hong Kong’s cargo industries were hit hard by the pandemic, with airfreight and container throughput falling by 6.7% y-o-y and 2.2% y-o-y, respectively, in the first 11 months of 2020. The fall stemmed from a pullback in trade activity, which saw total exports slide by 2.8% y-o-y and imports decline by 4.9% y-o-y in the January-November period. However, the low base effect and gradual recovery in China ensured both exports and imports resumed y-o-y growth from September 2020.

Total trade with India and the U.S. experienced the sharpest decline, with the latter falling by 17.2% y-o-y in the first eleven months of the year. Taiwan, which registered trade growth of 19% y-o-y during the same period, replaced the U.S. as Hong Kong’s third largest trading partner.

Subdued trade and retail activity led to consolidation among many 3PL operators in 2020, with cost-saving emerging as a top priority. Downsizing moves were commonplace, while some occupiers relocated to more affordable options. In addition to seeking space in lower quality lift-access buildings, occupiers were also observed to be leasing tin sheds due to their higher space efficiency.

Vacancy for purpose-built high-specification warehouses ended the year at 3.6%. Ramp-access buildings recorded higher vacancy as occupiers downgraded, with 544,800 sq. ft. of space returned during the year. While overall warehouse vacancy stood at 3.6% as at end-2020, up from 2.6% a year earlier, this was by far the lowest across all commercial property sectors.

Data centres were a bright spot in 2020, supported by demand stemming from the introduction of 5G technology and rapid e-commerce growth. The year saw a total of 1.7 million sq. ft. of data centre space transacted in the investment and leasing markets.

Rising vacancy prompted landlords to turn more flexible towards rents over the course of the year. However, warehouse rents fell by just 6.8% y-o-y in 2020, a rate of decline far milder than in other commercial property sectors. Reflecting space availability, downward pressure on rents was strongest in ramp-access buildings, which registered falls of 8.3% y-o-y, compared to a 4.2% drop in cargo-lift premises.

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Figure 14

 

Although U.S.-China trade conflict and the U.S.’ restrictions on Hong Kong-made goods will likely persist into 2021, the trading environment is expected to improve over the course of the year. Should vaccines succeed in curtailing the global pandemic, a gradual recovery in major economies is likely to commence, leading to an improvement in global aggregate demand. China’s new “dual circulation” economic strategy and the recent establishment of the Regional Comprehensive Economic Partnership (RCEP) will also support the growth of trade in the medium-term.

Risks include the ongoing restructuring of global supply chains, which may continue to impact China’s manufacturing industries and affect Hong Kong’s trade sector. Any recovery in trade demand will likely be milder than that achieved from previous troughs. Weak local consumption demand is also set to persist until cross-border travel resumes. Warehouse demand from retailers will be limited for the duration of H1 2021.

Rapid online shopping growth will spur stronger logistics demand from e-commerce operators. Other demand may be spawned by general retailers and supermarkets exploring the feasibility of transferring some of their outlet costs to more sophisticated logistics services: a trend that could spur the transformation of traditional 3PLs to cater to these growing needs. Combined with the increasing adoption of 5G technology, this will also support demand for data centres in Hong Kong.

In addition to boosting online purchases of household goods, the pandemic has also led to a surge in deliveries of fresh food and groceries. This has generated robust demand for cold storage, with such facilities set to remain a favoured asset class in 2021.

Other key trends will include growing demand for warehouses in and around Tuen Mun stemming from the recent opening of the Tuen Mun-Chek Lap Kok Link and the extension of the Shenzhen Bay Control Point to provide round-the-clock cargo clearance services.

A proposed pilot scheme for charging land premiums at standard rates for the redevelopment of industrial buildings will encourage more revitalisation initiatives in 2021. As more ageing buildings are removed from the market for revitalisation or redevelopment, forced relocations will generate leasing activity and limit any hike in vacancy. Warehouse rents are therefore expected to remain flat in 2021.

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Figure 16

Hong Kong SAR Real Estate Market Outlook 2021

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聯絡資料

Henry Chin
金緯 博士
研究部主管
全球資本市場投資以及亞太區
研究部
+852 2820 8160
+852 2810 0830
marcos-chan-326x248-25072019
陳錦平
執行董事暨研究部主管
香港
+852 2820 2886