Industrial property transaction volumes surged 150% in Q4 2019

Rising redevelopment interest has countered the impact of social unrest.

Industrial property transaction values and volumes skyrocketed by 86% and 150% YoY in Q4 2019, respectively, thanks to redevelopment and investment interest, according to a report by Savills.

Transaction values surged upwards despite declines in industrial and warehouse prices, which hit 0.4% and 3.1% over the last quarter of the year. Vendors have become more flexible to unlock activity levels, Savills said.

However, social unrest still has an impact on industrial spaces. For instance, a floor (around 100,000 sqft) in China Resources International Logistics Centre was leased to Pricerite for under $14 per sqft effective, whilst around 20,000 sqft in Dynamic Cargo Centre was leased for below $13 per sqft.

As such, modern warehouse vacancy rates ticked up to 0.9% in Q4 2019, whilst modern warehouse rents fell by 5.4%.

“Redevelopment interest remains a bright spot in the industrial investment sector and with end-users also coming back to the market in a search for bargains, transaction volumes may be sustained over the next quarter or two,” Savills stated in the report.

It also added that the number of plot ratio relaxations for industrial redevelopment surged to 25 up to December 2019, with 12 of them already approved by the Town Planning Board.

Nevertheless, Savills is still expecting worsening conditions in the industrial property scene, projecting a 3% to 5% downward adjustment in 2020. The drifting trading and retail sales performance have begun to adversely affect the modern warehouse sector, resulting in rising vacancies and declining rents.

“Whilst many operators foresee a more uncertain year ahead, many of them may prefer to renew rather than relocating to take advantage of rental savings as any resulting CAPEX can often outweigh such cost reductions,” Savills noted.