HK industrial leasing demand remains sluggish

Third-party logistics firms and the automotive sector are leading leasing activity.

Hong Kong's industrial and logistics leasing demand remains subdued, though a growing deal pipeline suggests potential improvement, according to CBRE's report.

Rental trends are diverging, with new lease rents declining, whilst select properties have implemented rent hikes for renewals. The oversupply of Grade A offices in Kowloon is also pressuring industrial office rents.

Incentives for tenants are on the rise as vacancies increase, particularly with the addition of shadow space, CBRE said.

Third-party logistics (3PL) firms and the automotive sector are leading leasing activity, although 3PLs tend to expand within their current facilities rather than seek additional space, CBRE said. Some occupiers are opting for higher-quality properties that can support automation, it added.

Recent leasing activity includes a luxury brand’s relocation as part of a "flight to quality." Several companies have also moved their warehousing functions to the Greater Bay Area due to expanding operations in Mainland China. 

However, many occupiers are choosing to renew leases amidst ongoing economic uncertainty and limited capital expenditure, CBRE noted.

Institutional landlords are maintaining stable face rents whilst offering more incentives, with deeper discounts seen in older properties with long-term vacancies.

Samuel Lai, executive director of Advisory & Transaction Services for CBRE’s Industrial & Logistics business, expects leasing momentum to improve as trade recovers. He advised occupiers with upcoming lease expiries to begin negotiations early to secure the best terms.