Asia Pacific the most robust region in warehouse market

KUALA LUMPUR: Despite the global economic downturn, Asia Pacific remains the most robust region for the warehouse market even as rentals in most countries continue to decline 1H2009, according to Colliers International.

In its latest bi-annual report on industrial real estate, Colliers International said Tokyo ranked top globally in warehouse rents at US$22.18 per sq ft (psf), with Hong Kong at US$15.33 psf (2nd spot in Asia Pacific, 4th spot in the world) and Seoul at US$13.02 psf (3rd spot in Asia Pacific, 10th in the world).

Director of Industrial for Colliers International Hong Kong, Wayal Chiu said although the prime industrial land price in Hong Kong tops the world, it remains lower than that of Hong Kong’s Grade A office and luxury residential properties.

“Given the investment yield is close to 6%-6.5%, both enbloc and strata-title industrial properties are sought-after by Hong Kong investors,” he said.

“Meanwhile, compared with the notable rental fall in 1H2009, local warehouse rentals have stabilised in recent months,” Chiu said, adding that   industrial rentals in Hong Kong are projected to edge up 5% steadily in the next 12 months. 

Director of Research and Advisory of Colliers International Hong Kong, Simon Lo said with the current low interest rates and expectations of an economic recovery in the near future, the local industries market registered active sales activity after 1Q2009.

Although Tokyo and Hong Kong maintained their positions in the world ranking, warehouse rentals in the two cities dropped further from six months ago by 3.55% and 9.17% respectively.

On industrial prime land price, Asia Pacific took the top spots in land values, with Hong Kong at US$679.96 psf, Seoul at US$506.39 psf and Tokyo at US$470.76 psf.

“Our research shows that almost every country in Asia registered a substantial drop in rents, with Singapore and India registering double-digit declines,” said chief operating officer, Asia, for Colliers International, Piers Brunner.

“However, with the global economy showing signs of life, we do expect the warehouse markets in the region to firm up in the latter half of the year, particularly on the sales side,” he said.

Meanwhile, sluggish growth was again registered across the warehouse leasing markets in the Europe, Middle East and Africa (EMEA) region.

In particular, the UK, Hungary, Ireland and Spain remained the key areas of weakness. Most markets were characterised by little leasing activity.

For 1Q2009, warehouse rents across the region fell further on average by 6% in local currency.

Despite the falling rentals, Europe remains home to some of the most expensive warehouse rents in the world.

London’s Heathrow sub market holds the title for the second-most expensive warehouse space in the world at US$20.64 psf per year. Despite the price decline of 23.79%, this sub market registered the most expensive land in the EMEA region at US$60.66 psf.

The US and Canadian warehouse markets registered very weak results in 1H2009, with tenants returning substantial amounts of space in both countries. 

Even though construction continued to wane, vacancies in both countries moved up significantly, with further increases anticipated in the latter half of the year. 

The US economy is beginning to shows signs of bottoming but leasing activities is expected to remain very lethargic for the balance of 2009 and well into 2010.