Business confidence is plummeting among Hong Kong retail business owners according to research by the Royal Institution of Chartered Surveyors.
The RICS Q4 2015 Commercial Property Monitor forecast reflected a downturn in the retail market amid falling retail rents in Causeway Bay and Tsim Sha Tsui.
“The Occupier Sentiment Index of Hong Kong recorded a double-digit decline for a second consecutive quarter, at  minus 23, signalling a declining demand in the retail market,” said the RICS in a statement.
“The Hong Kong retail market outlook remains grim. Retail rents are expected to fall sharply: shops in Causeway Bay and Tsim Sha Tsui will drop by 15 per cent and 14 per cent, respectively.”
Meanwhile, the Investment Sentiment Index (ISI) dropped from minus 13 to minus 21, reflecting a challenging outlook in commercial real estate sentiment due to uncertainty in global macro environment and fading prospects from incoming tourism revenue.
“Demand in the office sector will remain strong and will hold steady in industrial sector, but demand for retail property will fall significantly,” concluded the RICS.
Hong Kong’s economy is projected to experience moderate growth due to China’s economic slowdown.
“Due to labour market deterioration and the negative wealth effect in mainland China, asset prices are expected to fluctuate and private consumption growth will continue to be restrained. In addition, fixed investments will suffer amid the weak business sentiment and the projected interest rate hike cycle.”
RICS Hong Kong External Affairs and Public Concerns Committee member Frank Wong said retail industry performance was unsatisfactory in Q4.
“Hong Kong’s retail industry is currently facing a challenge since high-spending mainlanders are less willing to travel to Hong Kong, and local consumers are cautious with their spending in regards to China’s slowdown.”
The Global Commercial Property Monitor is a quarterly market sentiment survey. All survey respondents are commercial real estate market practitioners. The sentiment index introduced by the RICS economic department allows it to track the trend of commercial property. The full RICS report can be downloaded here.