Investment Rating - The report indicates a cautious outlook for the industrial property market in Hong Kong, with rental rates declining and increasing vacancy rates in modern logistics properties [2][6]. Core Insights - The industrial property market sentiment in Hong Kong has continued the trend from 2024, with general industrial property rents decreasing by 2.5% to HK$12.5 per square foot, while modern logistics rents fell by 1.9% to HK$16.8 per square foot [2]. - There has been a slight improvement in the overall vacancy rate for general industrial properties, decreasing from 6.7% to 6.3%, whereas modern logistics properties experienced a significant increase in vacancy rates from 9.2% to 12.7% due to a lack of new leasing demand [2][6]. - Major logistics operators are expected to prioritize stable rental income over maintaining current occupancy levels, influenced by the development of AI technology and cloud services in mainland China, which may increase demand for electronic components and related materials in Hong Kong [6]. Market Overview - The report highlights that the overall market has remained stable compared to Q4 2024, with tenants seeking high-quality spaces at reduced rents [3]. - JD.com, a major e-commerce platform, is expanding its presence in Hong Kong, which may challenge existing online shopping platforms and physical stores [4]. - The government has extended the bidding for multi-storey building land in Tuen Mun and Yuen Long until July 25, 2025, indicating a lack of enthusiasm in the market for these projects [5]. Rental Trends - The report provides a detailed breakdown of industrial rental rates by region and type for Q1 2025, showing a decline in rents across various areas, with notable decreases in regions like Kwai Chung and Kowloon East [7]. - The modern logistics rental index and vacancy rates have shown a concerning trend, with the vacancy rate increasing significantly over the past quarters [8][9]. Major Transactions - Key leasing transactions in Q1 2025 include significant moves by major companies, such as Hellman Worldwide and Kintetsu, indicating ongoing demand for quality spaces despite the overall market challenges [3][11].