Warehouse vacancy has stabilized with more renewals and consolidation of leases taking place thanks to greater flexibility in rental negotiations.

• While the macro economy continued to drift in Q3 due to an uptick in virus cases and increasing US / China tensions, local logistics demand was buoyed by escalating demand for necessities and online retailing, with warehouse vacancies stabilizing.
• We saw more renewals and consolidation of leases in modern warehouses as landlords became more flexible in rental negotiations.  There were also some cost-saving relocations to basic warehouses in Tin Shui Wai / Yuen Long, where larger and more efficient floor plates at lower rents were on offer.
• After months of redevelopment sites dominating the sales headlines, there were significantly more income-producing assets changing hands in Q3, as the relatively high and stable yields of industrial properties attracting long-term investors.
• Looking ahead, while the virus situation is expected to remain volatile, steady logistics demand from necessities should help stabilize the warehouse market, with the gradual resumption of sea and road freight providing some upside in the near term.