Warehouse rents in Hong Kong keep pace with shop lease costs

Warehouse rents have jumped in step with the staggering pace of the city's shop rents, with the cost of a prime container port warehouse expected to double over a decade, according to real estate consultancy CBRE.

"Warehouse rents have gone up by 60 per cent in the last five years while street-level shop rents in Tsim Sha Tsui, for example, have also gone up some 60 per cent over the same period," said Marcos Chan, head of research for CBRE Hong Kong, Macau and Taiwan.

The surge is the product of tight supply of warehousing space. A vacancy rate of 4 per cent in warehousing is effectively full capacity, CBRE said, but Hong Kong's rate has been below 1 per cent since June.

In the last 10 years, retail sales have ballooned 186 per cent thanks to robust demand from mainland tourist shoppers, yet only four parcels of land have been released for warehousing.

"We talked to retailers. They are frustrated and are having difficulty in finding good-quality warehouse space," Chan said.

Warehouse rents are squeezing an already strained retail sector, which has been dealt this year with slowing economic growth and a month of protests that have affected shopping hubs such as Causeway Bay and Mong Kok.

Retail sales shrank year on year for six consecutive months from February, before rebounding slightly in August.