Leasing demand for Hong Kong retail space will be driven mainly by fast fashion or other mid-market brands in the short term future.
That’s according to a new outlook from real estate company CBRE which expects “weak” leasing momentum for the retail market as retailers remain cautious.
“Retail sentiment remained sluggish and retail sales continued to fall in the first few months of 2015,” said Joe Lin, executive director, retail services, with CBRE Hong Kong.
“This together with the recent government measures to cap visitor arrivals has exerted pressure on the retail industry. The likelihood of retailers scaling back their footprint in Hong Kong is low but the current weak level of demand will urge retailers to adopt a cautious approach towards expansion and make them more prepared to offer competitive rentals to secure tenants,” Lin said.
In the second quarter, CBRE expects luxury goods retailers to be less active in exploring new options but will remain a solid source of demand for premises in tier one locations.
“Rents for tier one shops are expected to remain flat whilst rents on tier two streets could experience a double-digit decline in 2015.
“Street shop landlords are becoming increasingly flexible towards rental negotiations, as vacancy rates on some tier two streets remain high. The current weak level of retailer demand means landlords are also willing to accept short-term lease renewals and lower asking rents.”
In the first quarter, CBRE says leasing momentum did not show any improvement on the previous quarter.
“Statistics point to weak retail sales momentum in quarter one. Demand for luxury goods remained particularly low.”
CBRE’s full Hong Kong Retail MarketView Q1 can be read here​.