High-end retailers expand as rents drop in Q2 2024

Causeway Bay outperformed, with rents increasing by 1.8% QoQ.

High-end retail brands in Hong Kong are taking advantage of currently affordable rents to expand or relocate to prime locations, driving up demand for high streets in core districts and Grade A shopping malls, according to Colliers.

Despite challenges, high-street rents showed resilience in the second quarter (Q2 2024), with a 1.0% quarter-on-quarter (QoQ) increase and a 7.4%YoY rise as tourism recovers, Colliers’ Quarterly Market Report: Q2 2024 revealed.

For the year, Colliers expects rent to trend not more than +10%.

Causeway Bay outperformed, with rents increasing by 1.8% quarter-on-quarter. Retailers are continuing to secure prime locations at attractive rents, supporting high-street rents, which are likely to outperform non-core retail in the coming quarters.

Whilst demand from goldsmiths may decline, the cosmetics sector is expected to remain active due to recovering sales.

Despite a surge in outbound travel that continues to put pressure on the retail market, the sector is expected to benefit from Mega Events and the expansion of the Individual Visit Scheme (IVS), which should boost inbound tourism. 

Additionally, the increased duty-free allowance for mainland residents, effective in August, is likely to support retail spending, though the impact may be limited due to the relatively low threshold of RMB12,000. 

A higher allowance would be necessary for a more substantial long-term effect.

Hong Kong residents' increased outbound travel has diverted attention from the retail sector, particularly affecting neighborhood and regional malls. 

This shift contributed to a 6.1% year-on-year (YoY) drop in retail sales during the first five months of 2024. The food and beverage (F&B) sector in non-core areas was particularly hard-hit, with both local and mainland brands closing their establishments in quick succession.