Warehouse rents rebounded given early signs of a recovery in both local trading conditions and the retail sector with vacancies trending downwards.

• Both local trading conditions and the retail market rebounded in Q1 given gradual containment of the virus locally as well as a rebound in major regional economies.
• The leasing market was active over the quarter with a number of major relocations and renewals recorded, with warehouse vacancies falling heavily (from 4.1% in Q4/2020 to 3.1% in Q1/2021) as a result.  Modern warehouse landlords again reacted fastest with some rental increments seen as available space was quickly snapped up.
• Investment sentiment turned positive in Q1 with a few major deals concluded worth over HK$2 billion.  Strata-title industrial transactions also increased by 40% q-o-q as investors sought out this high-yielding asset class at various price points.
• The warehouse leasing market should continue to benefit from a recovering trading and retail performance as well as sustainable growth in e-commerce, both in the local market and cross-border.  We expect the business prospects of both freight forwarders and 3PLs to improve in the coming months, benefiting all types of warehouse.
• Looking into 2021, favourable government policies supporting redevelopment, as well as the high yields on offer should continue to attract developer and investor interest throughout the rest of the year.