Pop-ups and crossover concept stores are helping ease the pain in the Hong Kong retail property market.

According to JLL’s Mid-year Land and Property Review 2016, the year-long slump in retail sales continued to have a negative effect on the property market in the first six months of this year. Rents of high street shops fell 8.1 per cent in the first half after falling 22.6 per cent last year, according to JLL’s data.

“Luxury retailers remained the hardest hit with several seeking to consolidate stores. Supported by the sustained preference of retailers to open stores in prime shopping centres, rents of prime shopping centres stayed firm in the first half.”

But JLL head of retail Terence Chan says both retailers and landlords are trying different methods to stimulate sales.

“More retailers are exploring opportunities to open crossover concept stores to raise brand profile while developers are adding more pop-up stores and increasing the share of F&B tenants to draw shoppers.”

While vacancies in prime shopping centres remain tight, some centres are starting to feel vacancy pressure as retailers consolidate stores, he said.

“This is likely to lead to some prime shopping centres trimming rents in the second half, dragging overall rents lower for the full year. For high street shops, we forecast rents to fall 10-15 per cent in 2016.”

JLL says the pressure on retail rents has been driven by declining tourism numbers and thus falling local retail sales.

Hong Kong tourist arrivals contracted 8.4 per cent year-on-year in the first five months of the year, compared with growth of 3.9 per cent in the corresponding period in 2015. Arrivals from Mainland China continue to fall, down 11.8 per cent. But the year-to-date tourism market saw positive growth from markets such as Thailand, Singapore, Japan and the UK.

Hong Kong’s total retail sales declined 10.8 per cent in the first five months of 2016, against average annual growth of 9.1 per cent over the last 10 years.

“The fall in retail sales was led by the ongoing plunge in jewellery and watch sales and the consumer shift away from luxury goods and towards mass market goods. Adding to this has been a strengthening Hong Kong Dollar, which has made other global shopping destinations more enticing for mainland tourists,” the report concluded.

“Mid-range and lifestyle retailers along with F&B operators are now the primary drivers of demand as luxury brands and watch & jewellery retailers further retreated from the market.”