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JLL:  Warehouse rentals will flatten out next year

HONG KONG, 9 December 2015​ The external trading sector remained weak in 2015 with the total value of imports and exports falling by 3.6% y-o-y and 1.7% y-o-y, respectively, in the first ten months of the year. Coupled with record high rents, leasing activity gradually slowed in the second half of 2015 with leasing demand mainly driven by the relocation requirements of third-party logistics (3PLs), often for cost saving purposes. ​

Despite the slowdown in demand in the second half of the year, the vacancy rate in the prime warehouse market further tightened from 4.2% at the end of 2014 to 1.7% at the end of 2015. The drop in vacancy was due primarily to the strong take-up (733,900 sq ft) recorded at Asia Logistics Hub – SF Centre, a warehouse development in Tsing Yi completed late last year.

Rental growth in the warehouse market continued to be hindered by the difficulties faced by 3PLs in passing higher rental costs onto their clients, up by 7.1% in 2015 after growing by 11.5% in 2014.

Ricky Lau, Head of Industrial at JLL Hong Kong, said: "We expect demand for warehouse space to remain soft due to the continued headwinds in both external trade and domestic retail sector in 2016. The completion of new supply and softening demand in the higher-end of the market is likely to drive up the vacancy rate of ramp access warehouses and weigh on rents. We believe warehouse rentals will flatten out next year."

Hong Kong Warehouse Indicator -- % Change




2016 Rental Forecast
Flatted Factories▲6.9%N/A