News release

Hong Kong’s logistics market to improve in 2021

Lack of new supply supports logistic facilities’ rents

September 14, 2020

HONG KONG, 14 September 2020 – The vacancy rate of logistic facilities in Hong Kong is expected to tick upward to over 3% by the end of 2020 as the slowdown in the domestic and global economies affects the local logistics market, according to JLL’s latest logistic market research report released today.

The city’s logistics market has been negatively impacted by global trade tensions, the slow domestic economy and a slump in retail sales. The domestic retail slump triggered by the COVID-19 outbreak further exacerbated conditions in the logistics market in early 2020. Over the next 12 months, nearly 102,000 sqm of marketable space is set to return to the leasing market upon lease expiry, as some domestic retailers and import/exporters are set to reduce their logistics footprints. Moreover, private consumption expenditure, merchandise trade and retail sales volume of Hong Kong are all forecast to have negative growth in 2020, as the weakened economy in the aftermath of the pandemic could take longer to recover.

Ricky Lau, Head of Industrial, Hong Kong, JLL, says: “However, on the flip side, there are no projects in the pipeline expected for completion before 2022. Growing demand for e-commerce, meanwhile, will create new demand in the market. We expect logistic facilities’ rents to rebound slightly in the second half of next year. In short run, high-end logistic facilities will face higher downward pressure as companies look for cost-saving alternatives. The rental gap between the high-end and mid-end of the logistics market will narrow.”

According to the report, there is increasing capital allocation into the sector in Asia Pacific, the shift towards e-commerce accelerated by the COVID-19 pandemic, and strong exposure to fast-growth industries, have rapidly shifted how logistics real estate functions and operates, with implications for both owners and occupiers of this asset class.

Across Asia Pacific, COVID-19 has influenced both investment flow and leasing demand. Uncertainty around underwriting assumptions including rent and vacancy forecasts, costs of capital, travel restrictions, and lack of pricing visibility has limited volumes in 1H20, declining by 32% year-on-year. Despite these headwinds, investor sentiment towards the Asia Pacific logistics sector remains positive.

“Logistics remain firmly on the radar of investors and although a moderation in deal activity has been observed, recent signs show the market becoming increasingly sophisticated. The inflow of capital into logistics has resulted in more complex transactions and greater participation by both established and new investors into the sector, which we expect to continue,” says Stuart Ross, Head of Industrial and Logistics, Southeast Asia, JLL.

As investors continue to reimagine their Asia Pacific logistics strategies, JLL forecasts several key themes to gather momentum and reinforce the structural shift occurring in the sector.

  • Pursuit of platform deals: There is an increasing trend towards acquiring logistics platforms rather than individual assets. Investors gain captive tenant networks and achieve scale quickly through this sophisticated transaction route. Platform acquisitions, potentially via mergers or privatisations, also provide additional ways to access and expand into the logistics sector.
  • Rapid institutionalisation: The world’s largest investors are investing more into logistics real estate. Additionally, a sizeable portion of new supply is large-scale modern logistics assets of institutional grade, which are expected to draw more institutional capital.
  • Value upside: While growth in values is likely to slow between 2020 and 2023, investors’ confidence in the structural drivers for the logistics sector is expected to remain intact. Capital values are forecast to stay relatively firm, with modest yield compression expected in some markets across the region.

Overall leasing demand has inevitably slowed during the first half of 2020, with net absorption[1] around 700,000 sqm lower in 1H20 (2.2 million sqm) than in 1H19 (2.9 million sqm).

However, there has been a spike in short-term demand, particularly from grocery retailers and health service firms. Supply chains continue to be impacted, resulting in a greater focus on supply chain risk mitigation and resilience.

“The pandemic will accelerate trends already in play across the sector, such as increased internet penetration rates, expansion of online grocery, omni-channel retailing and the integration of technology into logistics and warehousing. However, led by occupier and investor commitments, the sector is well placed to respond to the post-COVID-19 recovery,” says Peter Guevarra, Director, Research, Asia Pacific, JLL.  

Changing customer demands and consumer habits will drive ongoing change in the strategies of logistics occupiers in Asia Pacific. Key shifts influencing occupier decision-making, which JLL expects to accelerate, include:

  • Multi-storey logistics developments: Densely populated cities, limited logistics land availability, and relatively high land prices have supported multi-storey logistics developments in many markets in the region, with demand now emerging in Australia and India.
  • The evolution of last mile logistics: Expect to see more conspicuous shifts to urban logistics, delivery optimisation, cross docking centres, and the use of autonomous vehicles.
  • Rise of third-party logistics: Tenants are upgrading from outdated, often small and owner-occupied facilities to newer facilities in premium locations to support growth in the food and beverage, healthcare and pharmaceuticals, and office and technology equipment industries.

Read the full report here.

[1] JLL tracked markets in China (Tier 1 and 2), Hong Kong, Tokyo, Singapore

About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $18.0 billion in 2019, operations in over 80 countries and a global workforce of nearly 93,000 as of June 30, 2020. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit