Mapletree $473M Buy of Hong Kong Logistics Site Marks 57% Discount from 2022

Singapore’s Mapletree Investments has won a warehouse site near Hong Kong’s Kwai Chung Container Terminals at a price 57 percent below what a nearby site sold for in 2022, as declining port activity undermines logistics demand in the Asian commercial hub.

As the only offer for Tsing Yi Town Lot No 202 in the New Territories, the Temasek Holdings-owned firm’s bid of HK$3.68 billion ($473 million) won it the rights to develop multi-storey modern logistics facilities and a public vehicle park measuring up to 227,836 square metres (2.45 million square feet), according to an announcement by the city’s Lands Department, with the plot located next to an existing Mapletree facility in the city.

“We are pleased to confirm the award of the tender for a modern logistics development site at Tsing Yi (Lot No. 202) which is located next to our existing Mapletree Logistics Hub Tsing Yi. We look forward to the completion of yet another quality logistics site in Hong Kong SAR,” a Mapletree spokesperson told Mingtiandi.

At HK$1,500 per square foot of built area, the deal marks a discount of approximately 57 percent from what ESR paid for a smaller logistics site nearby in 2022, with analysts attributed the change in pricing to decaying conditions in Hong Kong’s industrial real estate market.

“The great drop in land price was due to market conditions. Demand for logistics is weak, and the outlook is subject to uncertainty bought by possible trade war. In addition, the scale of the newly granted project is much bigger than the last one in 2022. High investment cost deters the interests of some potential bidders,” Alex Leung, chief surveyor at CHFT Advisory and Appraisal, told Mingtiandi.

Leung noted the sale price is in line with market expectations, with his firm having anticipated a price between HK$1,410 to HK$1,510 per square foot for the tender.

Lukewarm Response

Mapletree acquired the site of its Tsing Yi facility in 2013, which it has since developed into the 120,550 square metre Mapletree Logistics Hub Tsing Yi in a project completed in 2016.

“Now that the new site is granted to Mapletree, they can enjoy the synergy effect with their adjacent development upon the completion of the new building,” said CHFT’s Leung.

Along with ESR and Australia’s Goodman Group, the Singapore firm had been among three bidders for Kwai Chung Town Lot No 531, the last major logistics site to be put up for tender in Hong, with ESR having paid just under HK$5.26 billion to acquire that plot in 2022.

Weak logistics demand, rising vacancy rates and high constructions costs are seen as having deterred other developers from bidding in the latest tender.

Container throughput Kwai Tsing Container Terminals has declined by nearly 20 percent since 2022, and is down by around 41 percent compared with 2014, according to CHFT. Weaker demand has driven up vacancy, with multi-storey logistics centres now around 10 percent vacancy, compared with 4 percent in 2022, CHFT said.

Supply to Rise

The low key bidding for the Tsing Yi site is also seen as bad news for Hong Kong’s plans to sell more industrial plots in the coming weeks.

The Lands Department will close tenders for sites for multi-storey industrial buildings in Hung Shui Kiu Town and Yuen Long Town on March 21 with both plots located in the northwestern part of New Territories, about 25 kilometres away from the Tsing Yi site.

The property consultancy estimates that the Kwai Chung and Tsing Yi areas will see about 6.5 million square feet of new supply by 2027 to 2028, with CBRE predicting the upcoming industrial tenders could also struggle.

“The lukewarm response to this site unfortunately suggests that the market response to the upcoming Yuen Long and Hung Shui Kiu site sales, which have more obligations for developers, will also be weaker,” said Hannah Jeong, head of valuation and advisory at CBRE Hong Kong.

With the Hong Kong government planning to sell three more plots near the city’s container port by 2027 which would yield nearly 465,000 square metes of gross floor area, the new supply from the three new projects is expected to put pressure on industrial landlords.

“The current high-quality logistics vacancy rate is hovering below 10 percent, which is still healthy. However, the addition of new supply in three years will likely increase the future vacancy rate,” Jeong said.

Expanding Logistics Portfolio

The Tsing Yi acquisition aligns with Mapletree’s growing focus on logistics, which is its largest asset class, with warehouses making up 41 percent of its owned and managed properties as of March 2024.

Recently the firm has been adding logistics assets outside of Asia to its holdings, having last month purchased 10 warehouses in Spain and another in the UK from Blackstone for $328.7 million last month.

In December Mapletree acquired a 22.5 acre (9.1 hectare) logistics site in New Jersey with plans to develop a 250,000 square foot (23,226 square metre) logistics facility on the plot.