Asia Pacific industrial land prices ranked number one and two in the world in 2007 with Hong Kong at US$1,001 per square foot and Tokyo’s Ariake submarket at US$363 per square foot, according to a March report by Colliers International.
“The high land price in Hong Kong was due to the limited land supply and strong industrial demand, particularly underpinned by the booming logistics industry,” says Wayal Chiu, director of Industrial Division, Colliers International (Hong Kong) Ltd.
The fact that a number of developers build their land banks by paying land premiums in order to convert industrial sites to hotel or other commercial use, is also driving up industrial land prices.
Taking into account plot ratio, the accommodation value of industrial sites ranges between US$102 per square foot and US$109 per square foot in Hong Kong.
Local warehouse space, meanwhile, remains modest by world standards. London’s Heathrow submarket registered the most expensive warehouse space in the world in 2007 at a rent of US$27.64 per square foot per year. Continuing the world ranking, three Japanese markets ranked two, three and four, with Oslo, Norway coming in fifth and Dublin, Ireland sixth. Hong Kong (US$16.92 per square foot per year) and Singapore (US$15.34 per square foot per year) ranked the seventh and tenth respectively.
Looking forward, trade and the movement of goods are expected to show a corresponding downshift amid anticipation of a decelerating economy in the world in 2008. According to Simon Lo, director, research and consultancy, Colliers International (Hong Kong) Ltd, “This global slowdown potentially will cause a decline in leasing and letting activity in warehouse markets around the globe. However, with China and India leading the way, the Asia Pacific region is expected to remain the growth leader in the industrial market in 2008.”
Port cities in Asia Pacific remain very robust, as intra-region trade keeps relatively strong. Warehouse rents in the region vary, with Hong Kong, Singapore and Japanese markets all posting lease rates over US$15 per square foot per year, and most of the other submarkets staying at about US$10.60 per square foot per year or below.
London’s Heathrow submarket not only saw the most expensive warehouse rent in 2007, its land price also registered the most expensive in the EMEA region (Europe, the Middle East and Africa) at US$164.48 per square foot. Most European economies are expected to slow in 2008 relative to 2007 as the global credit crunch forces many companies to limit growth in the face of a more uncertain business environment.
In North America, warehouse rents in Honolulu rank the most expensive (US$15.72 per square foot per year) in the region, but number eight in the world. In the year ahead, North American markets connected to either the energy sector or agriculture are expected to remain very strong, but those exposed to consumer spending and manufacturing are anticipated to register more modest gains.
“As the US economy cools, leasing activity is expected to show a corresponding decrease as the effects of a slowdown in housing filter through to the economy,” says Ross Moore, senior vice president, market and economic research, Colliers International USA. “Reflecting sound fundamentals, however, most North American markets expect warehouse rents to either hold steady or increase in the coming twelve months.”
