Weaker retail sales to put pressure on HK shop rentals: report

Retail sales dropped by 2.9% for the first time in five months.

The drop in retail sales will likely put pressure on Hong Kong’s retail rents, Knight Frank reported. 

The total retail sales value declined by 1.7% year-on-year to HK$29.1b in May, whilst it dropped by 2.9%YoY in the first five months of the year. 

“The outlook for Hong Kong’s retail market remains highly difficult, so retail rents are expected to face further pressure,” Knight Frank reported.   

“Uncertainty in the economy, interest rate hikes and delays in the border reopening could weigh on consumption sentiment.”

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Retail sales have particularly been weighed down by the absence of tourism. Its impact has been felt by burberry, which had to close its three-storey flagship store in Canton Road. Valentino, Tiffany & Co, and Coach have also followed suit as they closed down their respective stores in Canton Road. 

“While shop rentals in prime locations dropped drastically, some prime spaces in Russel Street, in Causeway Bay, have become more affordable to local retailers,” knight Frank noted. 

Citing market sources, Knight Frank reported that Shop 26 in Russell Street was leased for a monthly rent of HK$200,000, a significant drop from the peak HK$1.52m per month previously. 

“On the bright side, the second phase of the HK$5,000 consumption vouchers to be disbursed in August could provide a tailwind, underpinning much-needed retail sales and restaurant receipts for the time being,” the report also read. 

Read more: Why landlords are becoming more optimistic about the retail market