Cost-conscious Hong Kong's retailers seen driving down rent up to 5%

APAC rent growth will also slow.

It has been noted that Hong Kong has reached a turning point, with rents being expected to experience a drop of up to 5.0% as retailers become more cost conscious.

According to a research note from CBRE, growth in rents in the APAC region will continue in 2015 but at a slower pace—rental growth is projected to ease to 2.4%, compared to 5.4% in 2014.

Meanwhile, with rents growing by 10%, Tokyo will be top performer in APAC, with Taipei, Sydney and Melbourne seeing modest growth.

Prime rental growth in China will be less than 5% in 2015, with key retail markets divided—growth will being driven by Beijing and Shanghai but dragged by Shenzhen and Guangzhou.

Here's more from CBRE:

Vacancy pressures in suburban areas will continue to intensify, especially in mainland China as many of shopping centers are built by inexperienced developers. Singapore will also experience supply pressure.

Prime retail prices will diverge in 2015 with Greater China experiencing the biggest downward pressure on price growth. The retail capital value growth in APAC will slow notably, dropping from 6.5% in 2014 to 1.6% in 2015.

Joe Lin, Executive Director, Retail Services, CBRE Hong Kong, commented:

“The market will become more challenging for landlords in 2015 as they will have to deal with more budget conscious retailers entering into lengthier negotiation processes. Occupiers, meanwhile, will benefit from being more patient and taking time to formulate a proper strategy.

The release of some space in core areas by luxury retailers due to consolidation will bring some new supply to the market. With the gradual reduction of luxury consumption by consumers, retail receipts is likely to be affected and therefore overall rents will experience downward pressure.”