Prime street shop rents tipped to rise by up to 10%: Knight Frank

But, rental reversions at mid-tier shopping centres remain negative.

Hong Kong’s prime street shop rents are forecast to increase by 5% to 10% this year, even as mid-tier and neighbourhood malls continue to record negative rental reversions, according to a Knight Frank report.

The report said recent leasing transactions indicated improving demand in selected prime locations.

For instance, Hurlingham Polo leased a 1,200-square-foot ground-floor shop in Central for about $150,000 per month, 36% higher than the previous rent of $110,000. 

In Mong Kok, cosmetics retailer SaSa reportedly pre-leased a 2,430-square-foot unit at Nathan Centre for approximately $450,000 per month, nearly 30% above the rent agreed two years earlier. 

Overall retail sales in the city rose 7.9% in May. Sales for the first five months increased 10.6% to $171.5b.

Luxury categories, including jewellery, watches and valuable gifts, recorded the strongest growth, rising 25.8% during the month. 

Mainland visitor arrivals increased 13% to 26.71 million in the first half, whilst average spending by mainland overnight visitors rose 3.8% to $5,305 in the first quarter.

However, whilst tenant sales growth at prime and neighbourhood malls has returned to positive territory, rental reversions at mid-tier centres remain negative and are likely to stay under pressure in the near term.

“The increasing local penetration of e-commerce and cross-border spending will continue to drag the mass retail and thus impact the mid-tier and neighbourhood malls,” Knight Frank said.

The report showed residents made an estimated 61.8 million outbound trips in the first half of the year, contributing to cross-border consumption leakage for retailers reliant on domestic demand.

Online retail sales increased 32.3% year on year in May and accounted for 9.2% of total retail sales. Mainland e-commerce companies have also started expanding into physical stores, with JD.com opening its first overseas JD MALL in Wan Chai in June. 

The store occupies about 30,000 square feet, the property consultancy added.