Hong Kong’s industrial property market has drawn strong investment this year, backed by the relaunch of the government’s Revitalisation 2.0 scheme.
There was HKD13.2 billion invested into industrial property in the first half of 2019, according to JLL. This compares with HKD35.3 billion during the whole of 2018. The figures include deals over HKD20 million.
Hong Kong’s government last year reactivated Revitalisation 2.0 for the industrial sector. In addition to exempting waiver fees on changes to a building’s use, the rejigged scheme allows for the gross floor area plot ratio to be relaxed by up to 20 percent in the redevelopment of some buildings, enabling owners to build at a higher density. The scheme has also been expanded to allow for the conversion of industrial buildings into transitional housing.
“We see the capital value of industrial properties outperforming the market and rising by up to 5 percent this year,” says Joseph Tsang, Chairman and Head of Capital Markets at JLL Hong Kong.
Compulsory sales continue to be a viable alternative source of land supply for developers to sustain their project development pipelines, says Denis Ma, JLL Hong Kong’s Head of Research.
The capital value of flatted factories and prime warehouses increased by 2.4 percent and 3.5 percent respectively in the first half of 2019. The jump compares favourably when compared to the city’s other real estate sectors where leasing eased. Capital values of Grade A offices and high street shops have fallen by 0.6 percent and 3.8 percent respectively since the start of the year.
Growth has been recorded despite increasing geopolitical concerns, including international trade wars and social upheaval in Hong Kong.
“Concerns around the U.S.-China trade tensions and global economic uncertainty has led to investors becoming more cautious but industrial property in Hong Kong is proving to be a safe haven for stable yield, thanks to the government’s revitalisation 2.0 policy and low vacancy rates in the city’s office and prime warehouse markets,” Tsang says.
The first half saw a limited number of transactions for prime warehouses, even though low vacancy and robust rental growth characterised the sub-sector.
Current Transactional Yields for Hong Kong’s property sub-sectors
Industrial: 3.0% – 4.0%
Retail: 2.5% – 3.5%
Office: 2.5% – 3.0%
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