Industrial rents forecast to sink

PUBLISHED : Wednesday, 13 May, 1998, 12:00am
UPDATED : Wednesday, 13 May, 1998, 12:00am

Rents for all forms of industrial space, including industrial-office (I/O), are expected to fall by up to 13 per cent this year as 5.43 million square feet of new space comes on the market, says a survey by Colliers Jardine.

Take-up would be affected by the economic slowdown and the changing economic structure of the SAR, said the report.

According to Colliers Jardine, vacancy rates for the I/O category of space will increase and rents will fall because of the new supply this year, slightly more than two million sq ft.

The area with the largest growth in I/O space will be Kwai Chung, where an estimated 800,000 sq ft is due on the market.

Just under 600,000 sq ft of I/O space will be built in Cheung Sha Wan and slightly more in Kwun Tong.

The report said pressure on I/O rents would vary from area to area, depending on the quality of the premises.

The new supply could depress I/O rents by as much as 7 per cent overall in 1998.

Meanwhile, because there would be an increase in the supply of every classification of industrial space, vacancy rates would increase in all sub-categories of industrial space.

Average rents for private-flatted factories, which had been decreasing by about 7 per cent this year, were expected to fall another 13 per cent during the course of 1998.

Traditionally, flatted factories have been used for heavy-duty manufacturing, often involving noxious chemicals, and small-scale storage.

As manufacturing continued to decline as a percentage of the overall gross domestic product, more and more of the space would be used for storage, said the report.

As a result, there was still a demand for this type of relatively cheap space.

Rents for warehouse premises were expected to fall by about 7 per cent, even though demand was expected to remain fairly stable in the light of the increased supply.

Vacancy rates for warehouse space were expected to increase on Hong Kong Island and Kowloon.

However, in the New Territories and New Kowloon, which covers Boundary Street northwards to Kwai Chung and Tsuen Wan, the reverse trend was taking place, thanks in part to the opening of the new airport at Chek Lap Kok.

'The new airport will speed up the demand for the relocation of warehouses in New Kowloon, Kwai Chung and Tsuen Wan,' said the report.

The outlook for I/O space also had a bright side.

As a result of infrastructure development, Kwai Chung, Tsing Yi and Tsuen Wan would emerge as new business centres.

'We anticipate the demand for I/O buildings in these districts will increase to benefit from the new infrastructure.

'The decentralisation of trade and commercial activities from traditional districts will continue,' said the report.

'In the medium term, Hong Kong's industrial property market will continue to evolve to match the growing demand for high-standard commercial space, with an increasing supply of multi-purpose I/O buildings.'