Despite improvements in macroeconomy, Hong Kong’s industrial property market continued to face structural challenges and weak leasing confidence in Q2. Temporary easing of China–U.S. trade policies and lower funding costs injected some momentum into the market, but overall sentiment remained cautious, according to Savills in its Market in Minutes – Hong Kong Industrial Sales and Leasing report of September 2025.
- Trade Data Rebounds, Leasing Demand Lags Behind: Temporary tariff reduction between China and the U.S. led to a year-on-year increase of 15.1% in exports and 14.0% in imports, with air freight volume rising slightly by 0.7%. However, container throughput dropped sharply by 8.2%, and overall warehouse leasing demand remained weak, with vacancy rates rising to 8.9% and rents declining by approximately 1.5%.
- E-commerce Logistics Shift Brings Both Challenges and Opportunities: The U.S. cancellation of the “de minimis” import tax exemption has prompted Chinese e-commerce giants like Temu and Shein to shift shipments to Europe and Asia-Pacific. While this poses near-term hurdle for Hong Kong’s logistic, it may create new growth opportunities in the medium to long term.
- Investment Sentiment Improves, Major Deals Stand Out: A notable drop in HIBOR has boosted investment activity. Key transactions include the sale of four industrial assets on Tsing Yi’s Tsing Tim Street for HK$750 million, and the sale of iTech Tower 3.1 and 3.2 — two data centres in Fanling — by Grand Ming to Bain Capital for HK$2.1 billion.
- Supply of High-Spec Logistics Facilities Increases, Competition Intensifies: New developments by ESR and Mapletree, scheduled for completion between 2027 and 2028, are expected to heighten competition for large-scale tenants. This may exert prolonged downward pressure on rents and vacancy rates.
- Market Outlook Remains Uncertain, Transformation Is Key: In the short term, transaction volume and capital values remain under pressure. A stable recovery will depend on clearer global trade policies and a diversified market strategy.
Mr. Jack Tong, Director, Research & Consultancy of Savills commented, “The Hong Kong industrial market in Q2 2025 reflected improving trade conditions and moderate recovery in some areas, but persistent caution and structural challenges continue to weigh on both leasing and investment sentiment.”
Mr. James Siu, Deputy Managing Director, Head of Kowloon of Savills said, “On the investment front, lower funding costs and the potential for interest rate cuts may support refinancing and selective asset acquisitions. However, due to the lack of strong end-user and investor demand, transaction volume and capital values are expected to remain under pressure in the short term.”
Mr. Oscar Chow, Senior Director, Deputy Head of Industrial & Kowloon Commercial Sales of Savills said, “Overall, while signs of recovery and isolated bright spots have emerged, Hong Kong’s industrial property market is likely to remain in a prolonged period of cautious sentiment. The market’s resilience will depend on its ability to adapt to shifting trade flows and further diversify its logistics and industrial foundations.”