Hong Kong retail vacancy rate drops
The Hong Kong retail vacancy rate declined in the final quarter of last year as retail sales rebounded on rising tourist numbers, says CBRE in its quarterly analysis.
“Although group tour restrictions from China to South Korea have gradually been relaxed, Hong Kong continued to see a steady increase in the number of visitors arriving from the mainland. Arrivals rose by 8.5 per cent year-on-year in October and November combined, pushing up overall visitor numbers by 6.8 per cent over the same period,” the research report said.
That helped fuel a 5.7 per cent increase in combined October-November retail sales in Hong Kong, compared with a decline in sales in the same period in 2016.
“Vacancy along tier one streets declined by 1.8 percentage points quarter-on-quarter, reflecting the gradual take-up of space. Leasing demand was led by mid-range new entrants,” said CBRE. Overall high street rents slid by 0.5 per cent quarter-on-quarter.
CBRE believes the high street shop vacancy rate will fall further in coming months and the rental decline will likely come to an end.
“The quarter saw the completion of several major renewals in prime locations that had been under negotiation for some time. In a few cases, tenants had been considering leaving their spaces, but had now opted to renew.”
The recovery has prompted some local watch and jewellery chains to expand, ending a long period of store rationalisation in the sector. For example, Prince Jewellery & Watch renewed its Russell Street lease while also taking the adjacent 600sqft site to expand its store. Chow Tai Fook took over a space on Kai Chiu Road in Causeway Bay, previously occupied by Glashutte and Luk Fook committed to a 2200sqft site on Nathan Road in Mongkok.
High street rents fell by 3.2 per cent year-on-year, the lowest rate of decline since 2015, reflecting the more optimistic leasing sentiment.
And CBRE concluded that while e-commerce has not significantly impacted brick-and-mortar retailers in Hong Kong, the growing focus on omni-channel sales is set to drive demand for smaller shops. It advises owners of large stores to consider subdividing the space to make it easier to lease.