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Consumer sentiment in Hong Kong is recovering, taking retail with it

By many accounts, from MasterCard to Nielsen Global Survey, consumer sentiment in Hong Kong is picking up, and retail sales volumes with it.

After nearly 24 months of negative indicators that saw rents down 50 per cent from peak on the high street and sales volumes fall o 18.5 per cent, volumes were up at the beginning of 2017. Double- digit drops transformed into scant 1.4 per cent dips in January, 6.2 per cent in February (expected given a major holiday that saw shopping for it previous month), and a 2.7 per cent gain in March.

On the property front, rents stabilised at a meagre 1 per cent decline in the first quarter of 2017.

Though sentiment finally turned a corner in late-2016, it could take up to another  nine to 12 months to clear prime street shop vacancies on second and third-tier streets. However, all signs point to Hong Kong coming out of the mire. The Census and Statistics Department forecasts positive growth for April and May: Hong Kong’s ability to reinvent and remake its retail landscape is unrivalled, and along with a greater number of creative lifestyle and entertainment offerings, four product sectors have helped the city navigate the rocky waters of the past two years.

F&B

More than any other, Hong Kong’s retail sector leaned on food and beverage operators to prop up the market at its direst. Malls increased their F&B presence to lure in locals and provide tourists with experiences they couldn’t ‘buy’ at home. Elsewhere, hip emerging districts like Sai Ying Pun and Kennedy Town welcomed internationally styled eateries such Metropolitan, Potato Head, Okra Bar and Rhoda to the dining scene. Traditional food hotspot Causeway Bay saw, among others, Alto Bar & Grill and modern dim sum Cheung Kung Koon open their doors, while o -the-beaten-path finds in Tai Kok Tsui created a new destination to explore.

Personal care

Cosmetics skincare, and personal care items have been a cornerstone of Hong Kong retailing for many years, and with the decline in luxury sales they have become even more prominent. Traditionally dominated by major multinationals like L’Oréal, Estée Lauder and Shiseido, personal care and cosmetics shops can occupy as much as 15 per cent of mall space according to InvestHK. Add renowned fashion labels that have cosmetics lines (Chanel, Anna Sui, Dior) and newcomers like Korean brands Memebox and Innisfree, who may have struggled to break into the market when retail rents were peaking,  and you have a cocktail for a 3.5 per cent increase in sales in March, for a total of HKD11.6 billion in the first quarter.

Outlet shopping

A good bargain transcends consumer sentiment, and outlet shopping helped Hong Kong’s retailers ride out the recent storm. Tung Chung’s Citygate Outlets, one of the best performing outlets in Asia, has posted numbers strong enough to prompt an expansion (set for completion in 2018) that will add 100 stores to its existing building and bring the total to nearly 200 spanning 475,000 sqft of lettable area.

In Kwai Chung at KC100, Italian-owned Florentia Village became the city’s first international outlet operator when it opened its 60,000 sqft mall in February. After launching three malls in China, parent company RDM was con dent enough in Hong Kong’s local mood and tourist numbers (Mainland arrivals remain off , but international arrivals are up) to bring its high-end outlet to the SAR.

Fast fashion

At opposite ends of the shopping spectrum are fast fashion, a staple among young consumers, and popular premium lifestyle brands. While leading fast fashion label Forever 21 shuttered its Causeway Bay flagship store citing flagging profitability, it wasn’t long before Victoria’s Secret committed to moving in. Its first flagship store in Hong Kong will o er a full range of merchandise across 50,000 sqft. Despite those profitability concerns, the likes of casual wear manufacturers GU (by Uniqlo) and Tokyo Base Co are setting up shop. And while the demand for premium goods has dwindled at first glance (fewer tourist arrivals, an unfavourable dollar), Hong Kong is a comfortable destination for Mainland shoppers when political winds take other locations o the map — and consumers still want premium goods.

Hong Kong retailing may not be out of the woods just yet, but things are looking up. Fundamental demand hasn’t evaporated completely, and with new developments in Tuen Mun, Tsuen Wan and Yuen Long making space for newcomers to the market, retailers and landlords alike have reason for cautious optimism.

It’s about time.

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