As Hong Kong retail sales fell 4.1 percent year-on-year in May, due mainly to the reduction in Chinese spending on high end goods, shopping mall landlords expressed optimism in the Hong Kong retail market.
CBRE Group said in its recent market view and analysis that these landlords have successfully adapted a healthy trade mix – addressing the changing needs of Mainland shoppers and taking into consideration the needs of the mid-range shoppers. Thus, prime high streets had a healthy rental growth between 0 to 50 percent on new leases and renewals, while the secondary streets have generally seen rental cuts, especially in Causeway Bay.
"The retail market should pursue its rental correction with tier-1 rent remaining stable, while tier-2 rents are expected to grow by up to 15 percent over the year," the CBRE report said. "In the coming quarters, international aspirational and mid-range retailers should drive the demand for new spaces, in response to the growing demand from Mainland China shoppers for mid-to-lower priced goods.
The CBRE Group also noted that the changing profile of Mainland shoppers should prompt retailers to adjust to this new dynamics and plan their expansions accordingly.
While the overall demand for new leases on Hong Kong’s high streets remained quiet during the quarter, there was no apparent slowdown in demand from mass market retailers as evidenced by Esprit leasing a total of 19,000 square feet in Central and Causeway Bay. CBRE added that cosmetics retailers and pharmacies also remained active in securing retail space, taking up a total of 19,700 square feet on high streets.