Weaker leasing demand for warehouse space projected in 2016

Slowing economy is one factor.

It has been noted that the slow economy along with sluggish trade and retail sales growth will result in subdued leasing demand for warehouse space in 2016.

According to a research note from CBRE, demand from 3PL operators will remain soft and is unlikely to pick up until global trade improves, which is not expected to occur in 2016.

This will exert a stronger impact on demand for direct-ramp access space, rather than those facilities with cargo lift access. CBRE Research expects warehouse space with cargo lift access to outperform those facilities with direct-ramp access, offsetting rental correction of the latter.

Here's more from CBRE:

Property owners are actively applying for the industrial revitalization waiver before the scheme ends in March. If the strong momentum of the office market continues, most approved buildings will be removed from industrial stock by 2018 to comply with the scheme’s deadline for undertaking projects. In total the policy may result in the loss of over 10 million sq. ft. of stock.

Vacancy in flatted factories and I/O buildings will remain low. However, I/O rental growth will be curbed by the incoming office supply boom from revitalized industrial properties and new office premises, especially in Kowloon East.

Mapletree Logistics Hub will add 1.6 million sq. ft. of direct access stock to the market in early 2016. Around 40% is pre-committed for logistics operations, mostly focused on consumer goods.

China Merchants’ logistics project in Tsing Yi is expected to be completed in 2017, with pre-leasing activity scheduled to begin this year. Sites for ‘tiny’ industrial units, mostly in Tsuen Wan and Kwai Chung, will continue to be released to the market.