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Hong Kong industrial land prices most expensive

HONG KONG: Prime industrial land prices in Hong Kong registered a 38% 6-month increase to become the world’s most expensive at US$1,063.59 per sq ft, according to Colliers International’s Global Industrial Highlights for the second half of 2009.

The general increase in demand underpins the growth of Hong Kong’s warehouse rents, said the report released on Thursday April 1, 2010.

“The sharp surge in land prices is due to the lack of quality land supply in core locations such as Tsuen Wan and Kwai Chung,” said Colliers International Hong Kong director of research and advisory Simon Lo. 

At the same time, non-core industrial sites have been continuously converted to other uses such as residential, which has limited the local industrial land supply, he added.

With the surge in prices, industrial capitalisation rate in Dec 2009 compressed 75 basis points year-on-year (YoY) to 4.75% – the lowest worldwide,
moving its global ranking from 2nd to top spot, said the report. The local factory rentals and prices are projected to rise 8% and 15%, respectively, in the next twelve months.

The report also found Tokyo registering the highest warehouse rent at US$21.76 per sq ft per year, followed by London-Heathrow at US$ 20.70 per sq ft per year, despite the negative 6-month change in both markets.

Oslo, Hong Kong and Geneva registered an increase in warehouse rents and were ranked 3rd, 4th and 5th respectively.

“Asia Pacific was the most robust region in the world. Tokyo, Hong Kong and Singapore ranked in the top ten, with Tokyo the most expensive. However,growth in the region was not yet back to pre-global financial crisis levels as many markets within the region continued to record lower rents with Seoul, Wellington, Jakarta and Perth in particular registering double-digit declines,” the report said. 

The report stated that with recovering economies and improving intra-regional and global trade, most of the Asia Pacific’s warehouse markets are expected to come off the bottom by mid-year.

"Signs in late-2009 indicated that the worst was over for the region, as tenants were still largely wary of taking additional space but the rush to return space began to show signs of subsiding," said the report. 

Meanwhile, rents in the U.S. and Canada fell 9.7% and 8.3% y-o-y in 2009. 

“With recovering economies in the U.S. and Canada, leasing activity is expected to pick up this year but occupancy rates are not expected to register a significant improvement until 2011. Meanwhile, rents are anticipated to drift lower, hitting bottom in the second half of 2010," the report stated.

In Europe, Middle East & Africa (EMEA), warehouse rents across the region fell on average by 3.7% (based on local currency) which represented an improvement from the first half when rents dropped by 6%. 

Three out of the top five markets with most the expensive warehouse rents were found in Europe. They are London – Heathrow (USD 20.7 per sq ft per year), Oslo in Norway (USD 19.19 per sq ft per year) and Geneva in Switzerland (USD 15.67 per sq ft per year), ranking 2nd, 3rd and 5th respectively.
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