Hong Kong Industrial Sales & Leasing - Apr 2020

Despite the widespread damage wrought by the pandemic, local supermarket operations as well as e-commerce logistics have been less affected.

• The COVID-19 outbreak which began at the turn of the year has disrupted first Mainland China and now global supply chains, resulting in a dismal local trading performance. While local retail sentiment was also knocked back, supermarkets as well as online retailing have remained relatively unaffected as people have continued to shop for necessities and shifted to online over the past three months.
• Most 3PLs and freight forwarders are facing a dramatic decline in business with the chaos in supply chains and the reduction in local retail sales. As a result, some have chosen to downside propelling warehouse vacancy from 2.2% in Q4/2019 to 2.9% in Q1/2020.
• While many landlords emained flexible in lease negotiations, most of them were not prepared to entertain the rental concessions demanded by tenants from the start of the year, which helped rents post a milder-than-expected decline of 1.2% and 1.8% respectively for overall and modern warehouses in Q1.
• Developers are seeing the current crisis as an opportunity to kick start redevelopment projects with a number of industrial sites transacted during the quarter. Nevertheless, such optimism has not filtered through to the strata-titled market as smaller occupiers / potential purchasers are fighting for survival.
• The challenging short-term business prospects of many traders and industrialists are expected to limit their buying activity in the strata-title industrial market, while industrial sites and buildings with redevelopment potential will continue to attract interest over the next few months as many developers are eager to replenish commercial landbanks.