Vacancy in Hong Kong’s storage facilities, warehouses and logistics real estate may double as retailers end leases, slash stock

Vacancy among Hong Kong’s warehouses, storage facilities and other logistics property is expected to double this year, as retailers hobbled by the city’s worst recession in decades slash their inventory and give up their leases, according to a forecast by JLL.

An estimated 102,000 square metres (1.098 million square feet) of marketable space is set to return to the leasing market this year when their leases expire, taking the aggregate vacancy rate to more than 3 per cent by the end of this year, compared with 1.6 per cent in 2019, JLL said.

“Retailers as well as those engaged in the imports-and-exports business are set to reduce their logistics footprint,” said JLL’s head of Hong Kong industrial real estate Ricky Lau. “The vacancy rate is expected to tick upwards.”

The glut of storage space will further weigh on rental charges, which have already fallen between 4 per cent and 7 per cent in the first six months of the year, as Hong Kong’s first-half economy shrank 9 per cent, putting the city on track for a full-year contraction of between 6 and 8 per cent.

Hong Kong’s logistics industry has been particularly affected, as the city – traditionally the transshipment point between China and the world’s consumer markets – struggled to cope with two years of a bruising trade war between the United States and China, as well as US sanctions including the forced relabelling of locally made products into dutiable Made-in-China goods.

Industrial rental markets in Beijing, Guangzhou, Shanghai, Shenzhen, Singapore, southern Vietnam, the Greater Osaka and Greater Tokyo regions are all likely to grow between 2 and 7 per cent this year, according to CBRE’s midyear review of the Asia-Pacific real estate market.