Hong Kong retail rents tipped to turn

Hong Kong retail rents are tipped for a modest rise of up to 5 per cent this year according to a research report from real estate advisor Savills.

But the authors, Nick Bradstreet, MD, head of leasing and Simon Smith, senior director, research & consultancy, noted that this year has already got off to a positive start.

“Landlords and retailers are wary given current uncertainties surrounding trade, stock market valuations, a weak renminbi and rising interest rates among other factors,” said Bradstreet. “But early indications are that the year has got off to a positive start.”

Smith added: “The well-observed shift towards higher same day mainland visitor numbers and lower per capita spending continued last year and we believe that this year can expect more of the same.”

Both prime street-shop and shopping-centre rents remained flat last year and rental growth had all but ground to a halt by the fourth quarter due to a weak sales performance, the report said.

However, the new cross-border bridge and rail link led to a 40.3 per cent year-on-year rise in same-day mainland visitor arrivals in November to 3 million. The number of mainland tourists actually rose during the first 11 months of last year by 14 per cent.

Smith said the increasing number of same-day visitors and a weak renminbi meant lower per-capita spending and unchanged retail rents by year end.

“Retail sales growth decelerated to only 1.4 per cent in November, the slowest growth rate registered since June 2017; yet most retailers reported a better-than expected performance over the Christmas holiday period.”

Thanks to the strong tourist demand, cosmetics and personal care products retailers are expanding rapidly in popular tourist districts such as Causeway Bay, Tsim Sha Tsui and Mong Kok. Food and beverage stores benefited, too, the report said.

On the contrary, the fourth quarter saw zero rental growth over the previous quarter in prime street shops in most districts, except Tsim Sha Tsui (down -0.9 per cent quarter on quarter). Whilst shopping malls in Kowloon were largely responsible for the marginal decrease with a negative 0.3 per cent change over the third quarter, mall rents remained unchanged on Hong Kong Island and in the New Territories.

“As a total of 2.3 million sqft of new supply will come on stream this year – the highest level since 2006 – the market fundamentals are expected to remain relatively stable.

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