Rental growth in office buildings inched up to 3% in 4Q12

But it's still a good year for industrial properties.

According to Colliers International Hong Kong Industrial Research and Forecast Report, Hong Kong’s industrial properties saw an encouraging performance in both leasing and sales market in 4Q 2012.

Improving external trade helped drive the performance, with the total value of re-exports growing 7.4% YoY between September and November to HK$903 billion, after a 2.4% decline between June and August.

In addition, substantial retail sales continued to support warehouse demand. In the three month period ending in November 2012, retail sales grew 7.5% YoY to HK$106 billion.

In order to capture the demand attributed to outsourcing at major corporations, a group of third-party logistics companies continued to look for quality warehousing premises, particularly those ranging from 30,000 to 50,000 sq ft.

Amidst the limited availability of quality stock, sustained demand from third-party logistics companies fueled the growth momentum of warehouse rents. Warehouse rental growth picked up as well, from 4.6-4.8% in the third quarter to 5.2-5.4% in the fourth quarter.

On the factory market front, more landlords opted to convert whole blocks of their industrial buildings to other uses in anticipation of potential rental income increase, similar to the previous quarter.

As such, the relocation of those previous tenants looking for suitable premises with sizes similar to their existing properties, supported a 3.2% quarterly rise in factory rents, compared to 1.8% quarterly growth in 3Q 2012.

Similarly, rental growth for industrial/office buildings (I-O) accelerated from 1.8% in 3Q 2012 to 3.0% QoQ in 4Q 2012. The growth was primarily attributed to a spillover effect from sustained rental growth in decentralised office premises.