Hong Kong’s industrial property segment seeing pick up amid rising demand for data centres, JLL says

“Data centres require scalable and reliable infrastructure and networks. However, the traditional challenge is the scarcity of new supply and buildings suitable for conversion into high-capacity data centres in the city.

Industrial property can be considered a rare bright spot for Hong Kong’s overall property market. While the city’s average office rents fell by about 6 per cent last year as vacancies lingered in double digits, settling at 12.8 per cent in December, mass residential capital values fell by 2.5 per cent month on month in December for an eighth consecutive monthly decline, bringing the full-year price decline to 5.5 per cent, according to JLL.

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Goodman Group, a Sydney-listed industrial property group, has also started construction on a new 50-megawatt (MW) data centre in Tsuen Wan, it said in a separate statement on Wednesday.

The project is scheduled to be completed in 2026 and involves the conversion of Goodman Texaco Centre, an old industrial building located in one of Hong Kong’s three major data centre availability zones.

“Tsuen Wan is a highly sought-after availability zone, a key focus for a location for us since 2014, when we acquired an end-of-life industrial property,” said Paul McGarry, Goodman’s head of Asia.

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“Since then, we have been regenerating the site into the 225MW Tsuen Wan West data centre campus. Together with the redevelopment of the old Goodman Texaco Centre warehouse, we are showing how we are increasing the value of our existing portfolio through the development of data centres.”

The completion of Goodman’s data centre will see a total of 392MW of data centres under management in Hong Kong.

Over the past six months, the Hong Kong data centre industry has recorded US$2 billion in leasing deals, Goodman added.

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RedBox storage, which is backed by Canadian investment management firm Brookfield, snapped up an entire floor of the Hong Kong Industrial Building in Sai Ying Pun for HK$82.9 million.

Elsewhere, the unnamed owner of two buildings on Wai Yip street in Kwun Tong filed a planning application to develop the combined sites into mixed floors of retail spaces and data centres spanning 290,163 sq ft.

As of the third quarter of 2023, the industrial leasing market saw average monthly rents for general industrial buildings rise by 11 per cent from a year ago to HK$12.90 per square foot, while average monthly rents for modern logistics buildings increased by 5.5 per cent to HK$17.40 per square foot, according to Knight Frank.