_Hong Kong: Retail market looking for a new rental benchmark

Hong Kong’s retail sales fell 5.7% year on year in February 2017, mainly due to the fact that this year’s Chinese New Year was in January. Retail sales of the “jewellery, watches and clocks and valuable gifts” category actually rose 2.5%, the second increase for this category in the past 12 months. Visitor arrivals dropped 2.7% in Feburary, but during the first two months of the year, the figure rose 1.4%, with Mainland visitor numbers gaining 1.1%, thanks to 3.8% growth in overnight Mainland visitor arrivals.

These figures suggest that the market has continued to improve and evolve. Both landlords and tenants have been adjusting their leasing strategies during this period of consolidation. While a number of retailers have closed or downsized their stores, a number of major street shops were renewed or newly leased recently with rental discounts of up to 50-70% compared with the previous leases. 

One of the transactions involved Bonjour, which renewed the lease for its store in Canton Road, Tsim Sha Tsui at a 60% discount, but the lease is for only one year, and either the landlord or tenant can end the lease during that period. We expect that a new rental benchmark for retail premises will be set in the coming few months before the market enters a stabilised period during the second half of the year.

Read the latest Hong Kong Monthly Report - April 2017