Land challenges for Hong Kong's logistics sector

Leveraging Hong Kong’s extensive connectivity and privileged free-port status, coupled with cost effective multi-modal transportation options, provide an ideal platform from which to serve all markets in Asia as a Regional Distribution Centre (RDC).


Land challenges for Hong Kong’s Logistics sector were the key topics discussed at the recent Leadership Luncheon gathering of Supply Chain and Logistics Professionals (SCLP). 

Trade and Logistics is the largest of Hong Kong’s four major economic pillars - generating 26% of Hong Kong’s GDP and is responsible for 22% of total employment. 

Long established as a regional commercial hub and sourcing centre, Hong Kong is the world's eighth largest trading economy. The world class infrastructure and free port status are significant enablers of Hong Kong’s enduring success as a leading trade and logistics hub. Indeed, in the HKSAR 2014-15 Budget, the Financial Secretary emphasized that “visible trade in 2013, including re-exports, domestic exports and imports of goods, amounted to over $8.2 trillion, approaching four times of GDP.”

As the global centre of economic gravity has shifted firmly eastwards, Hong Kong is strategically located at the heart of The Asia Era. The National 12th Five-Year Plan specifically calls for strategies and tactics to enhance Hong Kong’s status as an international financial, trading and shipping centre; and also for Hong Kong to develop into a high-value goods inventory management and regional distribution centre (RDC).


Regional Distribution Centre and Global logistics Hub

Leveraging Hong Kong’s extensive connectivity and privileged free-port status, coupled with cost effective multi-modal transportation options, provide an ideal platform from which to serve all markets in Asia as a Regional Distribution Centre (RDC).

For example, the Tradeport logistics hub on Lantau island is strategically located just two minutes from the airport, twenty minutes from the container port and forty minutes from the border with mainland China, and serves a wide range of customers with cost-effective multi-modal logistics solutions for the Asia region.

Hong Kong’s critical mass of cargo and extensive air-and-ocean connectivity enable the network-effect that empowers its enviable leadership as the leading Regional Distribution Centre serving the whole of the Asia region. 

In the global air freight sector, Hong Kong International Airport is the world’s largest air cargo hub, handling over four million tons of cargo per year, with almost 100 airlines flying to over 160 destinations, including 40 in mainland China. 

Hong Kong also hosts the world’s fourth largest container port, handling over 22 million TEU containers per year (TEU being Twenty-foot Equivalent Unit), with over 200,000 vessels per year sailing to more than 550 destinations worldwide.


Land Shortages impacting Logistics Sector

Marcos Chan and Samuel Lai from CBRE presented the key findings from the recently released CBRE research report “Hong Kong Logistics: Retailers Expose the Lack of Warehouse Facilities”. 

They reported that during the last ten years, Hong Kong’s stock of warehouse facilities has only modestly increased - from 35.5 million square feet to 39.3 million sq ft – growth of only 5% during the decade when retail sales have increased by 186%! Retail sector tenants now take up about half of the warehouse space in Hong Kong, with overall warehouse vacancy rates down to 0.4 per cent in June 2014.

The Hong Kong Logistics Association (HKLA) 2013 survey reported an industry shortage of 4 to 5 million square feet of warehouse space, whilst the 2014 survey conducted by HKU Department of Industrial and Manufacturing Systems Engineering (IMSE) and BPS Global identified the need for an additional 70 hectares of land for logistics use.

In the 2009 policy address, the government identified a number of permanent sites totalling 29.5 hectares (around the Kwai Tsing area) to facilitate the development of a logistics cluster. However, since then a total of only 6.9 hectares have been released, and even then with restrictive lease terms for logistics operations, freight forwarding and third party logistics.

In terms of land sales, since 2004 the government has sold only four industrial sites; however during that same period, the government sold 110 residential sites, 14 commercial sites and 12 hotel and mixed use sites.

According to Darren Benson, Executive Director, Industrial and Logistics Services, CBRE Hong Kong, Macau and Taiwan, “While the government has been proactive in recent times in replenishing domestic and commercial land supply, the industrial market, specifically for logistics use has been largely left out of the equation”.

“Over the last decade only four sites have been sold by the government, providing only 3.7 million sq. ft. of additional warehouse stock, and representing only 6.2% of the maximum floor space of all government land being auctioned or tendered during the period.”

Industrial stock is being rezoned or revitalized in large amounts – but this is to facilitate residential and commercial developments, thereby further limiting the stock available for industrial use and further exacerbating the challenges for the logistics sector.

It seems incongruent that Trading and Logistics is the largest economic pillar by GDP and employment, but when it comes to the land sales allocations, it seems to become the forgotten pillar of Hong Kong’s economy!


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