Retail rents reach a new high in Hong Kong

Demand for milk powder and safe products for infants hike up consumer purchases in the country.

Consequently, private retail rent index in the New Territories grew by 15% and Hong Kong Island and Kowloon increased by 2% and 1% respectively. 

Here's more from the OCBC Investment Research: 

Retail rents and prices at new highs
The monthly HK property review reported that the Feb private retail rent index reached a new high of 141.1, 2.8% higher than in Jan (137.3) and 0.8% greater than the previous record of 140.0 in Nov 2011. The private retail price index, which could be interpreted as a leading indicator for rents, also set a new record of 347.2, a 1.6% increase from Jan (341.8) or a 1.5% increase from the previous high of 342.2 in Dec 2011.

Largest rent increase for New Territories
14 out of Fortune’s 16 malls, including its top three by valuation, are located in the New Territories, which saw the largest increase in retail rents. Rent in the New Territories grew 15% from Jan to Feb. Hong Kong Island and Kowloon saw increases of 2% and 1% respectively.

Jump in Chinese arrivals
In the first two months of 2012, visitor arrivals to HK increased 15.2% YoY, with visitors from the mainland increasing by 19.7%. Mainlanders are driving retail purchases in two key categories: luxury products and safe groceries. Of greater relevance to suburban retail mall owners like Fortune and Link REIT is the mainlander’s desire for safe foodstuffs, with milk powder being the most prominent example. The most recent tainted milk powder scandal in China erupted in Jan.

Dragon baby boom
As this is the Dragon year in the lunar calendar, we note that China and Hong Kong are expecting a 5% and 5-10% increase respectively in the number of babies born in 2012, according to state news agency Xinhua and the HK Hospital Authority. HK retail sales for milk powder and baby products should increase significantly this year.