Industrial Sector driven by cost saving and forced relocation

CBRE’s recently published Hong Kong Industrial Market View Q4 2013 notes that industrial demand picked up slightly and remained focused on cost-effective space. 

The high occupancy levels across the market allowed landlords to renew at significantly higher rates.

Some tenants were forced to relocate to lower grade buildings or more remote districts, while others with very long term occupation requirements were encouraged to look for purchasing opportunities. Average rental growth remained positive, buoyed by the lack of space and solid interest from occupiers.

Rental rates increased the most in Kwai Chung and Tsuen Wan with some landlords raising their asking rents in response to the lack of availability in the traditionally better valued premises in the outer New Territories.

Senior Director, Industrial & Logistics Services, Darren Benson, said: “This year will continue to see a tight vacancy in the market.  As there is only one modern logistics centre expected for completion this year and that the new facility will be significantly owner-occupied, this will limit the space to be released to the market.  As such, rents would be kept at high levels.  In addition, rental growth should be boosted by demand from some office tenants selecting industrial or industrial/office space as alternative to expensive office units.“