Worldwide CBRE: The demand for upgrading and renovating logistics facilities is accelerating.

The latest research report from CBRE shows that Hong Kong is rapidly transforming into a sustainable international hub for smart logistics, driven mainly by the booming development of cross-border e-commerce, increasing volume of high-value goods, and market demand for advanced value-added logistics services. In order to maintain competitiveness, logistics operators are actively prioritizing high-spec logistics properties with automation technology, higher floor-to-ceiling heights, energy-efficient systems, and comprehensive facilities. CBRE's head of research for Hong Kong, Kelvin Chan, stated that the continuous growth of cross-border e-commerce and high-value goods such as electronics, commodities, pharmaceuticals, and art will bring significant development opportunities to the logistics industry in Hong Kong. Although the penetration rate of e-commerce in Hong Kong is projected to reach 9.4% by 2025, it still lags far behind global and mainland levels, indicating a huge growth potential in the market. With the continuous rise in online sales, it is estimated that the warehouse space occupied by local e-commerce operators in Hong Kong will double by 2035 based on linear growth. However, as technological advancements enhance warehouse efficiency, there may be changes in demand. In this context, modern logistics real estate increasingly emphasizes value-added services, automation, and sustainable development. Tenants have a strong demand for institutional-grade logistics facilities with advanced specifications to improve operational efficiency and support the adoption of new logistics technologies. However, the majority of logistics facilities in Hong Kong are older buildings with outdated specifications, many of which have small floor areas and low ceiling heights. Over half of dedicated warehouses in Hong Kong were completed over 30 years ago, with 10% of them being over 40 years old, hindering the adoption and development of modern logistics technologies. Lawrence Leung, Executive Director and Head of Industrial and Logistics for CBRE Hong Kong, stated that as logistics operators are increasingly seeking properties that support modern, automated operations, the demand for upgrading and renovations is accelerating. Tenants currently prioritize buildings with direct vehicle access, larger floor areas, higher ceiling heights, and stable power supply to accommodate automation systems and heavy equipment. Additionally, facilities such as parking and management, electric vehicle charging, and smart security are becoming increasingly important. Many companies still operate in old non-warehouse-style industrial buildings, and he estimates that the upgrade demand from such tenants alone is already as high as 52 million square feet in the long term. Kwai Tsing has become the most advanced logistics area in Hong Kong, with 8.4 million square feet of high-quality warehouse supply completed between 2010 and 2025, accounting for 60% of the total warehouse supply in Hong Kong during the same period. The new projects now account for 34% of the total floor area in the Kwai Tsing area, significantly enhancing the overall logistics capacity in the area. With its superior location, Kwai Tsing has become the preferred choice for logistics companies handling high-value goods, e-commerce enterprises, and freight forwarders. From 2023 to 2025, electronics companies leased 415,700 square feet in the area, accounting for 69% of such tenants in Hong Kong; while e-commerce companies leased about 347,800 square feet, accounting for 40% of e-commerce tenants in Hong Kong. The large logistics development projects totaling 6.7 million square feet expected to be completed by 2028 will further consolidate Kwai Tsing's leadership position. In addition, the Northern Metropolis Area will provide a significant opportunity for the logistics infrastructure in Hong Kong. This area is planned to have up to 74 million square feet of industrial and logistics floor area, expected to become a major driver of future growth in Hong Kong, promoting the development of a variety of modern logistics facilities to support brownfield relocation and future high-value logistics demand. Modern logistics highly relies on automated systems that require higher vertical space. Traditional rental calculations based on building area (square feet) are insufficient to reflect actual capacity. The "3D rental model" based on cubic volume (cubic meters) can more accurately measure storage efficiency. In fact, modern logistics facilities with higher ceiling heights often have more cost-effective 3D unit rentals, even if their 2D rentals are higher. CBRE expects the 3D rental model to become more common with the acceleration of automation and value-added services. The logistics industry in Hong Kong is at a crucial turning point. The rapid growth of high-value goods, cross-border e-commerce, and advanced logistics services is driving demand for modern facilities at unprecedented speeds. Kwai Tsing will continue to lead in the short term, while the development of the Northern Metropolis Area will bring long-term new momentum to the logistics real estate market in Hong Kong. CBRE recommends that the Hong Kong government adopt more flexible and forward-thinking strategies to promote the transformation of logistics real estate, including excluding ramps from land price calculations, relaxing the "double-counting" rule for higher ceiling heights, allowing low-density logistics projects in new development areas to comply with global top warehouse standards, and adopting a phased development approach in the Northern Metropolis Area to ensure market stability and support smooth transitions for brownfield businesses. These measures will help Hong Kong consolidate its position as a sustainable international hub for smart logistics and establish a technologically capable and forward-looking logistics ecosystem.