HK retail leasing market stable amidst shifting consumer trends

The overall high street vacancy rate held steady.

The retail leasing market in Hong Kong remained stable in Q2 2024, according to Cushman & Wakefield.

Despite a 6.1% year-on-year decline in total retail sales amounting to $162b from January to May 2024, excluding the medicines and cosmetics category, high street vacancies remained relatively stable. 

The report said also showed that key retail districts like Tsimshatsui experienced a notable decrease in vacancy rates by 1.2 percentage points to 10.6%, driven by increased tourist footfall. Meanwhile, Causeway Bay, Central, and Mongkok maintained stable vacancy rates quarter-on-quarter (QoQ).

“With the steady rise in inbound tourist numbers, high street rents across districts saw modest single-digit growth in Q2,” the report said,

Tsimshatsui saw a significant 2.8% increase in rents QoQ, reflecting its appeal to inbound visitors. Central also saw a notable rise of 2.7% in rents, supported by strong local consumption and tourism spending.

"The trend of Hong Kong residents travelling to mainland cities for spending, especially during weekends and long holidays, has become a structural change,” Kevin Lam, executive director and head of retail services at Cushman & Wakefield Hong Kong.

“It is expected that the net outflow of outbound Hong Kong resident passenger trips compared to inbound tourists may even intensify compared to last year,” he added.

Looking ahead to the second half of 2024, Lam said rental growth across districts is forecasted to range from 0% to 5%. 

Whilst some international brands have capitalised on favorable rental conditions to expand, most retailers remain cautious amidst economic uncertainties. 

Mainland retail brands and F&B operators are also expected to drive leasing demand, reflecting broader shifts in consumer preferences towards experiential retail and dining.