New Premium Warehouse Set to Boost Hong Kong Air Cargo Growth and Facilitate E-commerce
The tight supply of warehouse space and the e commerce boom have created strong demand for premium warehouses in Hong Kong. A new facility located at Kwo Lo Wan (KLW) in Hong Kong International Airport’s (HKIA) South Cargo Precinct will boost the supply of premium warehouse space in the city by 15 to 20 per cent when it commences operation in 2023.
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Reinforcing Hong Kong’s air cargo leadership
Airport Authority Hong Kong (AAHK) recently invited tenders for the development and operation of the KLW premium warehouse with the objectives of reinforcing Hong Kong’s air cargo leadership, promoting trade and stimulating additional air cargo flow. “Ever since 2010, HKIA has been the world’s busiest cargo airport. With a strong year-on-year growth of 9.2%, HKIA handled 4.94 million tonnes of cargo in 2017. Counting the amount of airmail handled together, the total cargo throughput of HKIA has exceeded 5 million tonnes in 2017 - the first airport in the world to reach this milestone,” explains Cissy Chan, Executive Director, Commercial, AAHK.
“HKIA contributes significantly to the Hong Kong economy as it supports the territory’s four pillar industries, which account for 57 per cent of GDP,” continues Chan. “Even though air cargo accounts for less than 2 per cent of Hong Kong’s total cargo throughput by volume, it made up more than 40 per cent of total external trade by value in 2016. The HKSAR Government places a great deal of importance on air cargo development, which was highlighted in the 2017 Policy Address.”
One of the largest premium warehouses in Hong Kong
Hong Kong currently offers 40 million square feet of warehouse space, with half serving the premium category. But with occupancy averaging 90 per cent, this supply – especially in the premium category – is very tight.
The new KLW premium warehouse will occupy a site of 5.3 hectares and have an expected gross floor area of approximately 4 million sq ft, making it the third-largest warehouse in Hong Kong.
“Our specifications for this facility are very high,” says Chan. “We want to future-proof it against long-term logistics demands. As such, we require ramp access to most floors, a ceiling height of at least 6.5 metres, and floor loading of at least 350 pounds per square feet to enable the use of large-scale robotics and automation. We believe this is a welcome move for the logistics industry.”
Facilitating the growth of e-commerce
E-commerce retail sales have grown exponentially in the past few years, and this momentum is expected to continue. In particular, the boom of cross-border e-commerce in China has created enormous opportunities for express and small parcel air freight delivery. According to a study conducted by Seabury Consulting, cross-border e-commerce in China generated an estimated 1.28 million tonnes of air cargo in 2016.
“We aim to capture more cross-border e-commerce and its related businesses with the opening of this new premium warehouse,” says Chan. “Online shopping is all about instant gratification, so delivery time is of the essence. Hong Kong is strategically located in the centre of Asia, with half of the world’s population within a five-hour flight. We are a major transportation hub offering an excellent flight network serving 220 destinations. Our proximity to the Pearl River Delta and Greater Bay Area, especially with the imminent opening of the Hong Kong-Zhuhai-Macao Bridge located adjacent to the KLW warehouse site, makes for even speedier delivery. Adding to that competitive edge is our efficient 24-hour customs clearance service that expedites the entire process.”
Ensuring temperature-controlled shipment of high-value air freight
In July 2017, the Cathay Pacific Group, three cargo terminal operators and three ramp handling operators achieved prestigious IATA CEIV Pharma accreditation, a globally recognised and standardised certification for pharma air freight shipments. HKIA has been recognised as an IATA CEIV Pharma Partner Airport.
“We are one of the few airports to achieve this accreditation airport-wide,” says Chan. “This means we have the expertise to handle the entire pharmaceutical transportation process end to end, putting us in position to capture a larger share of this rapidly growing market where efficiency and high standards are paramount. In addition to pharmaceuticals, the new premium warehouse will also attract other temperature-controlled air freight goods such as fresh produce.”
International players invited to tender
Hong Kong’s strategic geographic location, efficient customs clearance and free-port status make it advantageous for companies to set up their regional distribution centres with value-added services at the KLW warehouse. “Hong Kong is an important international gateway to China and a springboard to regional markets,” says Chan. “Our connectivity will further increase with the commencement of the Three-runway System in 2024. We also believe HKIA will play a significant role in Hong Kong’s contribution to the national Belt and Road initiative.
“We invite Hong Kong and international developers with relevant experience and strong track records to tender for the development and operation of the KLW premium warehouse,” Chan continues. “Tenders will be judged on multiple factors rather than bid price alone. We expect bidders to have a vision for the future of the air cargo and logistics industry, and a plan to realise their vision with tailored design for the warehouse and its facilities. This is a strategic development to increase air cargo tonnage at HKIA and further consolidate our leading position in the global air cargo industry. Therefore, we will place great emphasis on the development proposals,” concludes Chan.
