Hong Kong’s retail leasing market easing

Hong Kong’s retail leasing market is showing signs of slowing in tandem with easing retail sales. 

According to real estate advisor Savills says shopping-mall rents changed little in the second quarter, while prime streetfront retail rents fell by 1.9 per cent. 

Savills does not expect any “big headline deals” in retail rentals during the second half of this year.

“The market lacks the momentum for active growth with unstable external factors having a powerful effect,” said Nick Bradstreet, MD and head of leasing. 

Hong Kong retail sales are down 1.8 per cent during the first five months of this year. Over a similar time frame, prime shopping street rents fell by 1.2 per cent quarter on quarter, with Central district dropping the most, by 3.8 per cent. 

In the major shopping-mall segment, base rents remained generally steady. This was helped by deals with major food-and-beverage tenancies at the newly opened OP Mall in Tsuen Wan:  Ruby Tuesday taking 5000sqft of space and Hadilao Hotpot 8000sqft at HK$400,000 per month. 

The lull in Hong Kong’s retail leasing market comes at a time shopping-centre landlords and retailers are reviewing their offer to shoppers.  

Savills says new market trends are emerging rapidly in Hong Kong and Southeast Asia: brands are turning to augmented reality (AR) to enhance the customer experience and retailers are thinking of new green initiatives with consumers responding positively.

“Despite the slowdown in retail figures, we see that new technologies are being adapted to upgrade the customer experience, changing the retail landscape,” said Bradstreet.

AR examples include an Ikea app which allows users to ‘place’ 3D furniture in their homes to scale, Benefit Cosmetics is encouraging customers to try on different eyebrow shapes before they shape their real ones; and MAC has launched an AR Beauty Try-On campaign.

On the green front, the use of banana leaves for packaging vegetables and other fresh produce was initiated by Rimping Supermarket in Thailand, and then adapted by major supermarkets in Vietnam and Indonesia (including Big C, Lotte Mart and Bintang). Although still in its testing phase, the idea is being well received by shoppers and retailers have reported a boost in sales for products packaged this way.

Simon Smith, senior director, research & consultancy at Savills, said trade tensions are hitting businesses across southern China and consumers are spending less on big ticket items as a result. 

“Landlords today seem to be more flexible when renewing existing tenants and are open to reducing rents if necessary.”

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