Colliers International, Asia Pacific

Global Industrial Market Experienced Downturn

Tokyo warehouse rents topped the world at US$24.31 per sq ft per year in 2008, according to the Global Industrial Highlights 2009 recently published by Colliers International.  London (Heathrow) warehouse market has lost its global top position in 2007, due to a plunge of 29.3% year-on-year in warehouse rent, and ranked the 2nd in 2008.  Two other Asia markets are in the top ten industrial warehouse rents ranking - Hong Kong took the 4^th spot at US$16.88 per sq ft per year and Singapore, the 8^th spot at US$14.64 per sq ft per year.

Global Top Five Prime Industrial Warehouse Rents in 2008 (USD per sq ft per year)

Hong Kong

Amid the current difficult business environment including the continued decline of trade throughput and re-exports, new occupational demand was rare in 1Q 2009.  In the industrial leasing market, downsizing and rationalisation on floor area usage were the key trends. “Most landlords became more proactive to lower their asking rentals in the order of 15% during the first two months of 2009 in order to retain their tenants.  In the case of warehousing sector, more individual landlords offered their tenants with favourable terms such as long leases with a term of up to 6 years together with a cap on rental growth upon lease renewal,” said Simon Lo, Director of Research & Advisory of Colliers Hong Kong.  “Looking forward, individual industrial occupiers might turn from lease to buy since the prevailing interest rate environment remains favourable. Therefore, the leasing market is going to see more downward pressure and the potential rate of downward adjustment is reckoned to be 15% to 30% over the next 12 months.”

At the end of 2008, Hong Kong also tied with Zurich for the lowest industrial capitalisation rates in the world registering 5.50%, although this represented a 37-basis-point increase from midyear.

Asia Pacific

Asia Pacific continued to be the most robust region in the world, but its export-dependent economies experienced a noticeable slowdown in the second half of 2008.  Seoul, Singapore, Tokyo and Hong Kong all registered a substantial decline in rents.  Although most markets in the region recorded a downward trend, the prime warehouse rents in Tokyo, Hong Kong and Singapore remained in the top ten worldwide.  Tokyo’s was the most expensive in the world at US$24.31 per sq ft per year, while the warehouse rents in Hong Kong (US$16.88 per sq ft per year) and Singapore (US$14.64 per sq ft per year) took the 4th and 8th spot respectively in the world.

Looking forward, the downward trend in the region is expected to continue, although intra-regional trade is anticipated to stay relatively strong.  Port cities with an emphasis on trade with the United States and Europe will remain key sources of weakness as global trade continues to trend lower.

North America 

During the second half of 2008, the U.S. and Canadian warehouse markets registered more sluggish results when compared with the first half.  However, Canadian markets still managed to see a modest increase in occupancy and only a marginal uptick in vacancy.  As the U.S. economy continues to cool, leasing activity is expected to show a further decrease as the effects of the slowdown in spending feed through to retailers and warehouse users. With weakening fundamentals, most North American markets could see rents decrease by as much as 15 - 20% in 2009.

Europe, Middle East, Africa (EMEA)

In the later half of 2008, the economies in EMEA registered a further slowdown, with the annualised GDP growth of Euro zone seeing -5.9%in 4Q 2008.  The economic downturn in the United Kingdom, Ireland and Spain gained speed as the banking crisis began to affect the broader economy.  European warehouse markets, after showing surprising strength through the first half of 2008, registered a noticeable slowdown in the second half of the year. However, Europe remains the home to the most expensive warehouse rents in the world.  The prime warehouse rent in London’s Heathrow at US$19.54 per sq ft per year was titled as the second most expensive worldwide, followed by Oslo at US$17.68 per sq ft per year. Meanwhile, the prime industrial land value of London’s Heathrow submarket (US$69.75 per sq ft) topped the EMEA region.

In 2009, the warehouse rents in France, Sweden, Russia, Ireland, South Africa, Spain and the United Kingdom are expected to decline.  For the rest of the EMEA region, however, solid fundamentals are anticipated to leave rents steady.

-end-

About Colliers International

Colliers Macaulay Nicolls Inc. (CMN) operating as Colliers International is a leading global real estate services company that provides a full range of services to real estate users, owners and investors worldwide. Colliers operates in 293 offices in 61 countries.  In Asia Pacific, Colliers has 62 offices in 15 countries.  Services include brokerage, property management, hotel investment sales and consulting, corporate services, valuation, consulting and appraisal services, mortgage banking and research.  Colliers International is a worldwide affiliation of independently owned and operated companies.  Locally, Colliers professionals serve clients in Hong Kong.

Contact Information

May Chow        
Regional Manager
Communications and PR, Hong Kong Marketing
Colliers International (Hong Kong) Ltd
Tel    852 2822 0736
Fax   852 2868 5275
Email: May.Chow@colliers.com

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