Hong Kong faces serious shortage of industrial land for logistics use
With only four sites coming on market in past decade, rents and demand have risen strongly
We all know about the city's lack of housing supply, but what is less well known is that it is also suffering a serious shortage of logistics land and facilities.
Some industry players warn that that shortage is emerging as a barrier to the development of the city's trade and retail sectors.
International property consultant CBRE estimates the warehouse vacancy rate dropped to 0.4 per cent in June from 1.1 per cent at the end of last year. The government puts the figure at a still low 4.6 per cent.
The low vacancy rate is partly because warehouse stock rose only 5 per cent in the past decade - a compound annual growth rate of 0.5 per cent.
A major reason behind the slow growth has been the lack of land for logistics use.
A research report released by CBRE yesterday revealed some interesting data - the government has sold only four industrial sites since 2004.
During the same period, the government sold 110 residential, 14 commercial and 12 hotel and mixed-use sites.
No industrial site is up for auction or tender on the 2014-15 land sale application list (through which sites are auctioned if a developer bids enough to trigger a sale).
Meanwhile, vast amounts of industrial stock is being rezoned or revitalised to facilitate residential and commercial developments, further depleting available options for industrial occupiers.
Darren Benson, an executive director for industrial and logistics services at CBRE, said the industrial market for logistics use had been largely left out of the land sales equation, describing it as a forgotten pillar of the city's economy.
The CBRE report highlighted the growing relationship between the logistics and retail sectors.
Retail sector tenants took up about 50 per cent of the warehouse space last year, as strong retail sales growth led to a surge in retained imports, creating enormous demand for warehouse facilities.
In the past decade, retained imports grew at a compound annual rate of 8.7 per cent, compared with 0.5 per cent in warehouse stock.
Warehouse rents climbed 136 per cent between 2003 and last year.
Some property consultants say the retail sector's demand for warehouse space will soften as sales continue to drop, but CBRE said the recently reported slowdown in growth momentum in the retail market was unlikely to leave a permanent dent on long-term warehouse demand.
The government has earmarked 10 hectares of industrial land in Tuen Mun, which could provide up to three million square feet of industrial floor space, but CBRE said any new supply from the area was unlikely to be seen before the end of the decade.