Hong Kong shipping and logistics

Australian logistics specialist Goodman aces Hong Kong firms with US$350m bid for Tuen Mun site

Analysts say the high cost of land has deterred companies from the mainland from putting in a bid for the 340,870 square feet site in Tuen Mun

PUBLISHED : Wednesday, 02 May, 2018, 10:00pm
UPDATED : Wednesday, 02 May, 2018, 11:36pm

Goodman HK Investments, a subsidiary of Australia-based Goodman Group, bagged a large plot in northwestern Hong Kong for HK$2.75 billion (US$350.3 million), the first logistics site the government put on tender in five years which surprisingly did not attract a single Chinese e-commerce behemoth.

Westlink Investments, a unit of Goodman, won the logistics site in Tuen Mun, the government said on Wednesday, beating local developers including Sino Land, Sun Hung Kai Properties and NWS Ports.

Tender sale of first logistics site in five years in Tuen Mun likely to fetch HK$2.56 billion

Management as well as Mapletree Investments, a subsidiary of Singapore’s Temasek Holdings. 

The absence of Chinese e-commerce companies came as a surprise, which analysts said was because of the sky high prices in the city. 

“The land is still too expensive for them,” said Vincent Cheung, deputy managing director for Asia valuation and advisory services at Colliers International. “It is good for mainland e-commerce companies’ to include Hong Kong in their portfolio, but is not a must-have place. They have large range of choices in other mainland cities to build their warehouses.” 

The 340,870 square feet site on Siu Lang Shui Road, Tuen Mun, opposite the River Trade Terminal container port, has a plot ratio of 2.5 times and is expected to yield a total gross floor area of 852,000 sq ft for a five-storey logistics centre.

The premium was about HK$3,230 per sq ft. 

“With that offer, they can even win a residential site in mainland,” said Cheung. 

Goodman already has vertical warehouses in Hong Kong. The company, together with DP World of Dubai, owns the ATL Logistics Centre. It is the largest multi-storey warehouse in the city, offering about 6.5 million sq ft of storage space.

“The location is not perfect for e-commerce business,” said Thomas Lam, senior director at real estate agency Knight Frank. “It is good for companies like Goodman for long-term investment for mid- to high-end logistics purposes. It isn’t a mainstream property for speculation.” 

It is good for companies like Goodman for long-term investment for mid- to high-end logistics purposes
Thomas Lam, senior director at Knight Frank

Lam expects total investment in the logistics site could reach between HK$4.5 billion and HK$5 billion, but costs could rise if it was positioned as a hi-tech site. Returns on rents could be about 4.5 per cent to 5.5 per cent. 

Lam said he was optimistic that Tuen Mun would develop into an important logistics hub in Hong Kong when it is linked to the Hong Kong-Zhuhai-Macau bridge. 

The bridge will connect the city to major industrial and commercial cities in the manufacturing hub of the Pearl River Delta in mainland China and will also connect Tuen Mun with Hong Kong’s airport.

Industrial buildings in the area are already seeing rising prices.

A 2,482 sq ft unit in the Tuen Mun Industrial Centre sold for HK$5.3 million in April, or HK$2,135 per sq ft, up 28.6 per cent from HK$1,660 per square foot in September 2016, according to Centaline Property Agency.

The last logistics site the government put on tender was a plot in Tsing Yi back in 2013, which was awarded to Mapletree Investments, a subsidiary of Singapore’s Temasek Holdings, for HK$1.69 billion, 50 per cent higher than market estimates. Mapletree beat subsidiaries of Sun Hung Kai Properties, NWS Holdings and Goodman Group.