Hong Kong street-front rents are down more than 50 per cent from their peak

Hong Kong street-front rents have plunged by 54 per cent from their peak in the first quarter of 2013, according to data from real-estate advisor Savills. 

Much of that decline has occurred in recent months since the Sino-US trade war broke out and amidst growing social unrest on Hong Kong’s streets, triggered in June by the now-axed extradition bill.  

According to Savills, Hong Kong street-front rents in all prime areas experienced double-digit declines during the third quarter of this year. Causeway Bay was hit hardest, down 17.5 per cent, as weekend and public holiday trade was disrupted by protest activities. Retail categories popular among mainlanders have seen significant retrenchment. 

Hong Kong Street-front rents in Tsim Sha Tsui and Mong Kok fell by 15 per cent quarter on quarter, and in Central by 13.9 per cent.

Mall rents have also been hit hard, dropping by 14.2 per cent overall. By region, Hong Kong Island mall rents were down by 13.6 per cent, Kowloon by 12.7 per cent and in the New Territories by 16.4 per cent. 

“Amid the doom and gloom, the positive news is Sheung Shui continues to see mainland visitors, and sales in the area are down ‘only’ 10 to 20 per cent in the absence of disruption,” observed Savills.

More locally oriented centres in Tseung Kwan O and Tuen Mun Town Plaza are also bearing up, while local restaurants are proving relatively immune, said Savills.

‘Difficult to see any upside’

Simon Smith, senior director, research & consultancy at Savills, said poor macroeconomic conditions compounded by social unrest are undermining Hong Kong’s traditional role as a retail hub in Asia.

“It is difficult to see any upside at this point.”

With more than 10 countries and regions having issued travel advisories for Hong Kong; several major events have been cancelled or postponed and August’s hotel occupancy rate dropped to 66 per cent, he said. 

“But, looking ahead, it is worth noting that Hong Kong is expected to remain a key market for retailers in the region and that while the trade war has undermined local and overseas consumption, the local residential market has remained relatively resilient and interest rates remain low.”

Savills believes that without a resolution in sight to either issue affecting Hong Kong retail, the current market conditions could prevail into next year. The negative impact of the Occupy Movement in 2014 was felt for at least 12 to 18 months, although day-trippers are expected to be the first to return when things returned to normal.


Nick Bradstreet, MD, head of leasing at Savills, said some street-front landlords are offering short-term and ad-hoc rent relief, cutting rents by 15 to 20 per cent for three months, or occasionally longer. 

“Mall landlords are less forgiving and are tending to wait and see. At Pacific Place, Swire has proved the exception, offering 10 to 30 per cent reductions on a case-by-case basis,” said Bradstreet.

As earlier reported, Hong Kong retail sales plunged by a record 23 per cent in August, with the luxury goods sector hit hardest, with sales down about 50 per cent per cent year on year. 

On a more positive note, given the weaker Renminbi, lower taxes and less inclination to travel, some luxury retailers are expecting record sales in mainland China in 2019.

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