News release

Flatted factories stock contracted at an annual rate of 0.6% since 2011

Shrinking industrial property supply gives support to rental growth

April 17, 2023

HONG KONG, April 17, 2023 – The stock of flatted factories in Hong Kong had been contracting at an annual rate of 0.6% between 2011 and 2021, the new supply in recent three years is far from replenishing the successive decline in the total stock, according to JLL’s The Vibrant Investment Landscape of the Logistics and Industrial Sector report released today.

The continuation of the Revitalisation Scheme encouraged more landlords to redevelop their industrial assets into premises for other uses, leading to the contraction in the stock of flatted factories at an annual rate of 0.6%. New supply was largely absent between 2018 and 2021. In 2021, the shrinkage was about 1.6 million sq ft. Although private storage stock rose by about 240,000 sq ft in 2021, the increase could only offset 15% of the stock withdrawal in flatted factories in the same year.

Between 2011 and 2021, the stock of flatted factories was reduced by more than 15 million sq ft. Given the completion of Goodman Westlink in 2022 and Cainiao Hong Kong Smart Gateway in 2023, the new addition of about 6.4 million sq ft is still far from replenishing the successive decline in the total industrial stock over the years. 

In 2022, a total of 24 industrial premises received approvals from Town Planning Board for redevelopment, with 57% of the 6.5 million sq ft of approved GFA transforming into offices, implying a continuous decline in industrial stocks going forward.

Gregory Ku, Head of Logistics and Industrial at JLL in Hong Kong, said: “We have to wait until 2027 to see another new industrial property completed after the new supply this year. Combined with the increasing demand for warehouses, cold storage and data centre boosted by e-commerce and technology development, the demand for logistics and industrial properties will continue to increase. We expect the industrial properties’ appeal to investors will remain strong and its capital value will rise 15% to 20% in the coming three years.”

Figures from JLL’s research show that the total investment volume of en-bloc industrial properties reached a total of HKD 34.1 billion in 2021 and 2022, well above the investment volume recorded in other property segments. Meanwhile, the participation of institutional investors surged from 11.1% in 2018 to 60.3% in 2021 and 44.1% in 2022. The logistics and industrial property market is the only commercial property segment that recorded rental and capital value growth amid the pandemic-induced downturn.

“Industrial properties have the potential of value-add conversion into specialised facilities such as mini-storage, cold storage, and data centres which could offer higher upside rental and price appreciation return to the investors,” added Ku.

In Hong Kong, there are only 11 en-bloc cold storage with a total gross floor area of 3.5 million sq ft with an estimated average age of 35 years. The existing stock is less than other types of industrial properties. The rising demand for medicinal products and the city’s aspiration of becoming an international aviation hub for perishable products will push up the demand for cold storage to a further extent, presenting more opportunities in the cold storage markets.

Data centre is another conversion option sought after by investors. A pre-commitment rate of 87% was achieved in Goodman Tsuen Wan West Data Centre Hub while that of HK1 by GDS reached 96%, which reflected the strong demand for date centre. The local data centre market is currently seeing more new joiners such as CLP, CK Asset and Angelo Gordon while existing landlords such as Goodman are also planning to convert one of its warehouses into a data centre.

Ku expects the recovery in the economy will provide a further boost to the logistics sector, both from domestic consumption and external trade.

About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $20.9 billion, operations in over 80 countries and a global workforce of more than 103,000 as of December 31, 2022. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit