Retail drives Hong Kong property prices upwards

Despite rising rents, local and international retailers continued their aggressive expansion to secure retail premises in prime locations.

Property consultants Jones Lang LaSalle’s latest research shows that persistent leasing demand drove up rents by 4.5% for both prime street shops and premium centres. Capital values for prime street shops also rose a further 9.7% in the first two months of 2012.

Supply of new retail space is eagerly expected by both international and local retailers following Hysan Place’s receipt of an occupation permit in March that will add 450,000 sq ft of prime retail space in Causeway Bay.

Jones Lang LaSalle said the retail sector remains the most active property sector in the first quarter with no signs of demand slowing. Retail sales continued to grow with a further increase of 15.2% y-o-y in January and February combined, after posting a strong overall increase of 24.9% in 2011.

The strong retail sales performance was driven in part by sustained growth in the tourism sector. Tourist arrivals in the first quarter rose by 15.2% y-o-y in the first two months of 2012, outperforming the 11.9% y-o-y growth registered for the same period in 2011.

The robust sales figures also contributed to activity in the leasing and sales markets, with retailers continuing to search for space and investors actively buying.

On the Kowloon side, Jones Lang LaSalle has been appointed sole leasing agent for 18 Mody Road, the only new commercial office supply in Tsimshatsui expected in 2012 that has some 9,000 sq ft (gross) retail space.

Tom Gaffney, Head of Retail at Jones Lang LaSalle Hong Kong, said Hong Kong remains a key focus and a dominant market for retailers in 2012.

“We strongly believe that we will see another year of solid retail sales, rental growth and transactions. We believe that locations such as Causeway Bay, Central and Tsimshatsui will see the most activity in this sector for the rest of 2012.”