High street shop rents to fall 5% this year

Hong Kong's retail scene is expected to brace for more headwinds.

The decline in Hong Kong's retail sales widened to 8.6% YoY in the first 11 months in 2016 from the 3.7% decline in 2015, corresponding to a 5.4% drop in tourist numbers in the same period. Sales of watches and jewellery were impacted the most, falling by 19.2% y-o-y in January to November 2016.

According to CBRE Hong Kong, high street shop rents fell a further 12% in 2016, after falling 17% in 2015, bringing the total decline to date to 27% from their peak in 2014. Shopping centre rents, however, were broadly flat in 2016.

“In 2017, slower economic growth in China and depreciation of the Renminbi are set to undermine mainland tourist spending in Hong Kong,” CBRE Hong Kong executive director for advisory & transaction services-retail Joe Lin said.

He added, "However, the fall in high street shop rents is not expected to exceed 5% in 2017, and by the middle of the year, most leases that were signed during the market peak of 2014 will have expired, meaning that rents are expected to stabilise from then on. Leasing momentum is expected to gradually improve from 2016.”