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Hong Kong
OpinionComment
Nicholas Spiro
Nicholas Spiro

The View | Why Hong Kong’s industrial real estate is going from strength to strength

  • Hong Kong’s industrial assets have supplanted offices as a dominant sector and also provide a rare bright spot for Asia’s commercial property market
  • A scarcity of quality industrial space and Hong Kong’s status as a logistics hub add to the appeal

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A Cathay Pacific cargo plane lands at Hong Kong International Airport on March 9. The airport is a leader in the handling of perishable cargo, underpinning the strong performance of the city’s logistics real estate sector. Photo: Yik Yeung-man
Nicholas Spiro

Asia’s commercial property investment market is slowing noticeably. The dramatic tightening in monetary policy has increased the cost of debt and triggered a repricing and reappraisal of assets. In the second quarter of this year, transaction volumes dropped 16 per cent quarter on quarter and 37 per cent year on year, data from JLL shows.

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Some of the sharpest falls were in the most actively traded markets, such as mainland China and Japan. What is more, the industrial and logistics sector, the key driver of investment activity during the Covid-19 pandemic, suffered a 63 per cent year-on-year drop in transaction volumes, the steepest decline among the main commercial sectors, according to CBRE.

However, the market that faced a succession of domestic and external shocks over the past several years has fared relatively well. In Hong Kong, investment activity last quarter rose 57 per cent quarter on quarter and 7 per cent year on year, data from JLL shows.

Furthermore, industrial transactions increased 103 per cent quarter on quarter and 37 per cent year on year, according to Colliers. The strong performance of the sector reinforces a trend that has changed the face of the city’s investment market.

Prior to the eruption of the pandemic, offices – which account for the largest share of commercial property deals in Asia – were the dominant sector. Yet, last year, industrial assets took the top spot for the first time and accounted for nearly half of transaction volumes in the first half of this year.
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At a time when Hong Kong’s economy – which fell into its second recession in three years last quarter – remains under severe strain because of strict quarantine requirements, the outperformance of the city’s industrial real estate market is all the more remarkable.
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