E-Commerce Boom Fuelds Industrial Property Sector
As a result of rapidly thriving e-commerce, high-tech Asian companies have established themselves as key players in Hong Kong’s industrial property market. Cainiao Network, a logistic affiliate of Alibaba, purchased a massive amount of industrial real estate in Kwo Lo Wan during June. It acquired over 4 million square feet of prime logistics space and will invest a colossal $12 billion to develop the site into a high-tech logistics hub.
Simon Smith, Head of Research and Consultancy at Savills Hong Kong, says that e-commerce and data centers have played a major role in Hong Kong’s burgeoning industrial real estate market. As a result of skyrocketing e-commerce, there is a growing demand for faster shipments which require futuristic, state-of-the-art warehouses driven by advanced robotics and cutting-edge automation.
Samuel Lai, the Senior Director for Advisory and Transaction Services at CBRE Hong Kong mentioned the three key factors that are driving the industrial sector in Hong Kong: the urgent need for more logistics networks, flight-to-quality relocations and the rapidly evolving technology in automation and logistics.
Prosperity in the industrial sector will be driven further by mega infrastructure projects such as the Guangzhou-Shenzhen-Hong Kong Express Rail Link that was established in September to significantly reduce the travelling time between the 3 major cities in the Greater Bay Area. To facilitate logistics, the Liantang/Heung Yuen Wai Boundary Control Point and the Hong Kong-Zhuhai-Macao Bridge will be completed by the year end and is expected to reinforce investment in the region for larger logistics facilities according to Lai.
Major high-tech companies like Tencent and Alibaba Cloud have established their presence in the region. Tencent is the biggest company in terms of revenue worldwide. It has expanded its overseas business by making heavy investments in the city and collaborates with Equinix for data centers in this area. Chinese e-commerce giant Alibaba’s cloud computing arm Alibaba Cloud opened data centers in Hong Kong way back in 2014 as part of its aggressive international expansion.
According to Smith, increasing demand for data centers (owing to the increasing demand for blockchain, cloud computing and e-commerce) will fuel the industrial real estate market.
Lai adds that international, Chinese and local companies in Hong Kong related to e-commerce and technological innovations are among the major investors in industrial property in Hong Kong.
Hong Kong’s trade regulations and policies as well as rapid developments in transport infrastructure have attracted heavy investment from leading cloud service providers such as Amazon Web Services, Microsoft and China’s BAT (a conglomerate comprising of Baidu, Alibaba and Tencent) which have now established a strong presence in the region. Things are looking good for Hong Kong as it aspires to become the regional hub for data centers and logistics.