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HK industrial land prices highest in the world

HONG KONG: Prime industrial land prices in Hong Kong continue to be the most expensive in the world at US$1,035 (RM3,105) per sq ft, representing a six-month growth of 9%, according to Colliers International’s recently released Global Industrial Highlights — 2H10.

Sales demand is expected to continue over the next 12 months and industrial property prices in Hong Kong are projected to increase by 15% to 18%.

“The government’s policy of revitalising industrial buildings continued to attract investors’ interest in en bloc industrial buildings. The substantial price premium of decentralised office premises over industrial properties located in the same district also stimulates investors’ appetite in the industrial sector,” said Simon Lo, director of research and advisory at Colliers International Hong Kong in a statement. “Meanwhile, in view of sustained rental growth, individual end-users are now seeking to acquire high quality industrial premises for self-occupation.”

In terms of warehouse rents in 2H10, Tokyo topped the world at US$22.56 psf per year as of end-2010. This is followed by London-Heathrow, Zurich, Hong Kong and Geneva — the global top five industrial warehouse rentals.

However, Asia-Pacific warehouse demand is expected to take a dip due to the impact on the regional trade after the March 11 earthquake and tsunami in Japan, said the report.

Hong Kong
The industrial market is supported by the robust external trade growth with the total value of re-exports up 21.6% y-o-y to HK$747 billion (RM289 billion) during the period from December 2010 to February 2011, following 18.2% y-o-y in the preceding three-month period.

“The continued growth of local consumption and re-exports volume is clearly benefiting the leasing demand of third-party logistics companies,” said Wayal Chiu, director of industrial services at Colliers International Hong Kong. “In addition, individual foreign logistics operators from Europe and mainland China, who seek quality warehouse premises with ramp access, acted as another driving force of the leasing demand.”

With Japan historically being the third largest export market for Hong Kong, the negative impact of the recent earthquake and tsunami on the local external trade is expected to become apparent over the next few months.

However, “while a slowdown in trade may be unavoidable due to the Japan disaster, Hong Kong’s recent strong economic performance as a result of robust growth in the mainland and other Asian economies may offset the possible negative effects arising from the Japan incident. Over the next 12 months, rentals of industrial buildings are expected to increase by 15%, while those of warehouses are projected to rise 12%,” said Chiu.

Asia Pacific
In 2H10, there was healthy economic growth in the region with exporters boosting sales both within the region and globally. Across most markets in the Asia-Pacific, warehouse rentals were steady or in upward swing. According to the report, Tokyo’s warehouse rentals were the highest at the end of 2010. Hong Kong and Singapore were in fourth and seventh spot respectively.

However, with Japan’s devastating earthquake, trade across the region will feel some effects with demand for warehouse space in the region expected to be sluggish, said Colliers.

North America
Both the US and Canadian warehouse market registered a noticeable pick-up in the second half of 2010. Warehouse demand in the US was concentrated in a number of port-related markets while in Canada, most markets recorded a fairly brisk period in 2H10. Amid signs of economic recovery in both countries, occupancy gains are expected to be sizeable in 2011, given healthy gains in manufacturing and a continued bounce-back in consumer spending, said Colliers. However, rentals are expected to remain largely directionless this year. Taking 2H10 as an example, rental in the US fell 2.9% while those in Canada increased marginally by 0.2%.

EMEA

In Europe, the Middle East and Africa (EMEA), there was sluggish leasing activity and little expansion. Warehouse rentals kept steady in 2H10, similar to the first six months in the year, although Europe is home to some of the most expensive warehouse rentals in the world. London-Heathrow, Zurich and Geneva were in the top five most expensive warehouse rentals in the world.

According to the report, London-Heathrow not only registered the most expensive warehouse rentals in EMEA, its prime industrial land prices at US$56.82 psf were the highest in the region.


This article appeared on the Property page, The Edge Financial Daily, April 22, 2011.

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