Interest rate cut in retail set to boost disposable income

The single-digit vacancy rate in high-street shop rents grew by 1% QoQ in Q3 2024.

The commencement of an interest rate downcycle will likely mean higher disposable income and improve household affordability, according to Lawrence Wan, senior director, head of advisory & transaction services for retail, CBRE Hong Kong. 

In the retail sector, the single-digit vacancy rate continued to underpin steady growth in high-street shop rents, which grew by 1.0% quarter-on-quarter (QoQ) in Q3 2024.

In contrast, following a decline of 11.9% year-on-year (YoY) in Q2 2024, total retail sales dropped 10.9% YoY in July and August combined, bringing the decline in the first eight months of this year to -7.7% YoY.

F&B groups contributed only 22% of leasing volume in Q3 2024, compared to 52% in Q2 2024. 

However, Wan also said that the retail industry has observed a renewed demand from international brands that had been quiet since the pandemic. 

Fashion brands accounted for 20%, making them the second largest contributor of leasing demand.

Moreover, high-street shop vacancy remained unchanged at 6.8%. 

Vacancy in the Central dropped by 1.3 percentage point (p.p.) to 7.9% while vacancy in Causeway Bay increased 1.4 p.p. to 5.3%. Vacancies in Tsim Sha Tsui and Mong Kok were at 8.7% and 6.3%, respectively.