Chinachem and ESR form JV to develop prime cold storage and logistics facility in Hong Kong
Artist Impression of the logistics site located in Kwai Chung
Chinachem Group (“Chinachem") has entered into a Joint Venture (JV) with ESR Group Limited (“ESR” or the “Company”, together with its subsidiaries the “Group”; SEHK Stock Code: 1821), APAC’s largest real asset manager powered by the New Economy, through its wholly-owned subsidiary Sunrise Victory Limited, to develop a prime cold storage and logistics facility at Kwai Chung in Hong Kong. As a leading property developer rooted in Hong Kong, Chinachem Group is extending its business to the logistics sector for the first time through this collaboration.
Expected to be completed in 2027, the facility has a strategic location at the junction of Mei Ching Road and Container Port Road South, at Kwai Chung in the New Territories, easily accessible by established road networks to Hong Kong’s central business districts, international airport, and the border to Mainland China. It will be developed on a 55,245 square-metre site (with a new 50-year lease expiring in 2072), which ESR had recently won via a Hong Kong government land bid on 20 July 2022. To maximise the allowable Gross Floor Area (GFA) of 138,000 square metres, the JV will develop a seven-storey facility with two basement levels of carparks.
In Hong Kong, there is high demand for logistics space, with vacancy rates at just 1.4% as at 2Q 2022 which is the lowest since 4Q 20141. For the next four years, there is no new supply of cold logistics coming to the market, while approximately one million square feet of cold storage space is being taken out of the market and converted into data centres. Furthermore, with limited supply of new modern logistics to cater to the growing e-commerce demand in Hong Kong and to serve cross-border requirements to China, rents in Hong Kong continue to be well-supported with a 5% to 10% expected growth for 2022.
Jeffrey Shen and Stuart Gibson, Co-founders and Co-CEOs of ESR, said: “In this new economy driven by the rising e-commerce industry and growing demand for imported food items and pharmaceuticals, our Kwai Chung project is poised to fulfil the growing demand for large-scale, cutting-edge logistics and cold storage space in Hong Kong while enabling Hong Kong to reinforce its leading position as a leading logistics hub to the world and to China. We are pleased to partner with Chinachem to develop an exceptional product that will unleash the full potential value of Kwai Chung and sustain the long-term development of the area by promoting job opportunities and thereby generate economic growth.
Donald Choi, Executive Director and CEO of Chinachem Group, commented: “We are delighted to collaborate with ESR to tap into an asset serving the New Economy, marking another key milestone in our business diversification strategy. In partnership with APAC’s largest fund and asset manager, we can leverage our extensive and solid experience in project management in the development of the acquired site into a modern and sustainable cold chain facility. With Hong Kong continuing to serve a window between Mainland China and the rest of the world, together with the blooming of e-commerce and increasing demand for processed food, both ESR and Chinachem are confident about the promising prospects of logistics assets. Looking forward, we will continue to explore and foster collaborations with ESR in other areas.”
Choi added: “As a developer of ‘Places with Heart’, Chinachem strives to create shared value for the community through a ‘Triple Bottom Line’ approach, which balances People, Prosperity and Planet.”
As part of ESR’s five-year ESG roadmap, ESR seeks to launch ESG initiatives such as increasing the rooftop solar power generation for its portfolio, in line with the Group’s priority to further enhance energy sustainability towards a 50% increase in solar power generation capacity by 2025. Chinachem has also established “CCG 3050+” with the commitment to setting Science-Based Targets in 2021, to set up a higher carbon reduction target for the group, for building a sustainable city and better future for the next generations.
ESR will work closely with CLP, its strategic partner in Hong Kong, to promote the use of renewable energy for this JV project with Chinachem. For this new logistics facility, it is in the plan to have an approximate area of more than 3,000 square metres designated for Photovoltaic (PV) panels at the rooftop.
In addition, the facility will have several sustainable building features and targets to achieve at least a Gold or Platinum certification for BEAM Plus and Gold for LEED. 30% of the site area will be designated for greenery, including a rooftop garden. The carparking spaces will also come with Electric Vehicle (EV) charging capability and there will be a recycling irrigation water system for the landscape area.