Industrial sales fell silent in 1Q15

Following a bustling 4Q14.

In Hong Kong's industrial sector, sixteen major transactions of over HK$30 million were concluded in Q1/2015.

According to a research note from Savills, almost a reverse of last quarter, volume increased by 45% quarter-on-quarter (QoQ) but total consideration declined by over 60% QoQ to reach HK$2.1 billion.

After a busy Q4/2014, investment sentiment quietened in the first quarter of 2015, not only in the number of transactions over HK$100 million, but also in regards to the size of the deals, as no billion dollar deals were inked over the quarter (the largest one being slightly below HK$500 million).

Notably, the buyers of the few larger deals were more focused on their redevelopment potential, including Soundwill’s purchase of the en-bloc Chip Tak Weaving Factory Building in Kwai Chung for HK$452 million, as well as the sale of Yue Fung Industrial Building in Yuen Long for HK$430 million.

Here's more from Savills:

Leasing market Slowing retail sales has had a knock on effect on retail-related logistics demand, and many operators stopped expanding on the back of declining demand. Coupled with the traditional quiet period for logistics between Christmas and Chinese New Year, significant leasing transactions were hard to come by.

As predicted previously, more warehouse space was released to the market towards the end of Q1, concentrated in warehouses in the Kwai Tsing/Tsuen Wan area.

Nevertheless, these units were only available in smaller areas (around 10,000 to 30,000 sq ft), and thus the overall vacancy rate of warehouses only increased marginally to 1.2% over the quarter.

While warehouse rents continued to increase and many logistics operators, including some multinationals, switched to costsaving mode, we nevertheless saw an upturn in interest for one-storey sheds in the New Territories, in particular those which have genuinely been granted waiver to operate as storage space.

However, we saw the government taking a much tougher stance on handling illegal operations on these brownfield sites, which should be a welcome sign for both warehouse and one-storey shed landlords as these illegal yet low cost options are gradually being taken out of the game.