Tsim Sha Tsui landlords can expect to take some pain in the first half of this year as retail rents continue to decline across the territory, according to projections from CBRE Hong Kong.
“The pace of rental decline will be more rapid in core areas such as Tsim Sha Tsui, as many leases in these districts will expire this year,” the real estate company said in its Q1 Outlook, released in full this week.
But the rental decrease in Causeway Bay will be milder in 2016 than in recent quarters, it says.
Joe Lin, executive director, retail services, with CBRE Hong Kong also warns that the number of lease surrenders could increase towards the end of the first quarter following the end of the festive season.
“As such, landlords may face greater pressure to decrease rents as early as late Q1.
“The rental down-cycle could persist for the next two years as downward adjustments gradually occur upon lease expiry.”
CBRE says Hong Kong retail rents on tier one streets are expected to decline by 10 to 15 per cent during 2016.
During the next three months, CBRE expects mid-market retailers will remain the main demand driver for retail space as lower rentals allow them to re-establish themselves in prime locations and/or expand their store networks.
CBRE expects Hong Kong will remain a key market for luxury brands, however, these retailers will likely consolidate and/or upgrade their shops in prime locations.
Lower tier streets will experience higher rental pressure as tier one locations continue to be preferred.
Meanwhile, the company says fewer lease surrenders were recorded in the last quarter of 2015 as retailers chose to stick it out during peak consumption periods.
It said leasing demand in Q4 was less subdued than in the previous quarter, but leasing activity by high-end brands remained limited.
Overall rents fell by 2 per cent quarter-on-quarter resulting in a 17 per cent decline for the whole of 2015. Rents in Causeway Bay slumped 24 per cent year-on-year and rents in Central, Tsim Sha Tsui and Mong Kok all recorded double-digit declines.