Retail leasing activity in Hong Kong slowed slightly in 2013 as more new entrants and existing brands closely monitor rental costs and the uncertain environment, says Cushman & Wakefield.

Strong consumption and tourism growth is supporting much more sustainable retail sales in 2013. In the first five months of 2013, the number of total and mainland China tourist arrivals through May increased by 13.2 per cent and 19.9 per cent, respectively, year-on-year.

Meanwhile, retail sales grew by 14.5 per cent during the same period.

However China’s slowing and shifting growth, and a still slow US recovery serve as reminders that uncertainties remain. As a result, there have been a growing number of brands and retailers more closely monitoring costs and expansions.

This caused a slowdown in leasing activity in the second quarter, particularly among high-end and luxury brands, which can also be attributed to a shift away from luxury buying by mainland Chinese.

Mid to high-end fashion and accessory brands and cosmetic shops are still expanding and the market is still seeing new brands enter the market as they expand their presence in Asia and China.

Local jewellery retailers such as Chow Tai Fook and Luk Fook opened more shops in both prime and secondary locations, but they have shifted their strategy to target the mass market by offering new affordable jewellery collections.

Overseas brands continue to establish a footprint in Hong Kong. Topshop opened its flagship store on Queen’s Rd Central; two new Korean cosmetic brands opened their shops in prime streets in Causeway Bay and Mongkok during the second quarter. Intimissimi, an Italian lingerie brand, will soon open a small flagship boutique in Central.

“Retailers are turning slightly more cautious and landlords are slowly adapting to this changing environment for the last few months. There are fewer new leases in prime locations and slightly rising vacancy in secondary ones,” said executive director for retail Michele Woo.

“Rents will remain stable, but limited supply and overall healthy demand will keep rents at a high level. We expect a more diverse tenant mix in the market in the next 12 months.”