Hong Kong SAR is one of the top three preferred destinations for cross-border expansion in Asia Pacific, as retailers’ optimism returns in 2023, driven by an increase in tourism and government stimulus, as well as strong domestic consumption, according to CBRE’s 2023 Asia Pacific Retail Flash Survey.
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According to the report, tier 1 cities in Mainland China have topped the ranking as the most preferred destinations, followed by Hong Kong SAR and Singapore, both taking second place.
The report also highlighted that Asia-Pacific retailers have an increasingly optimistic outlook moving into 2023, as business sentiment turns positive with 72 percent of retailers surveyed expecting their sales to rise from 2022, and 71 percent intending to open new stores, despite rising costs.
Retailers polled in the survey also believe that some online sales will shift back to brick-and-mortar retail as the world is returning to normal. Nearly half of the respondents expect physical store footfall to return to pre-pandemic levels.
The survey revealed that retailers prefer quality retail spaces in shopping malls and along prime high streets. They also have higher interests in secondary high streets (37 percent in 2023 vs 23 percent in 2021) due to their lower rents as compared to prime locations.
“China and Hong Kong are forecasted to enjoy the strongest sales rebound after lifting pandemic-related measures. Retailers are positive yet believe the rebound is in sight but will happen gradually over a longer period,” said Lawrence Wan, Senior Director, Head of Advisory & Transaction Services, Retail, CBRE Hong Kong.
“The return of Mainland China tourists to Hong Kong will give a strong boost to the sector. This is expected to drive leasing demand and rental growth, especially for tourist-oriented retailers. Retailers should also work with landlords for flexible leasing arrangements or fit-out incentives to manage costs.”
Retailers, however, remain cautious as they expand, with 57 percent of them planning to increase their footprint in existing markets, instead of entering new ones.
“Hong Kong’s retail sector has experienced a downcycle since the pandemic. The overall vacancy of high-street shops remained high at 15.4 percent in December 2022,” said Marcos Chan, Executive Director, Head of Research, CBRE Hong Kong.
“While high-street shop rents have declined by over 40 percent since the commencement of the market downturn in mid-2019 and the current retail leasing market still favours tenants, retailers shall consider regaining their exposures and footprints in tourist hotspots and take advantage of the deeply discounted rents.”