The weak renminbi and stock market are to blame.
Prime street shop rents are set to drop by at least 5% in 2019, according to real estate consultant Knight Frank, as Hong Kong’s main source of spending loses incentive to shop.
The renminbi depreciation brought about by the ongoing US-China trade dispute is poised to weigh in on the sector’s rental performance. A weak renminbi dampens the attractiveness of Hong Kong goods to Mainland tourists.
“Amidst these external uncertainties, leasing activity in prime streets remained subdued during the month, whilst vacancy rates continued to rise,” Knight Frank said in a report.
Additionally, the bearish stock market has also weighed on consumer sentiment on the domestic front. “The performance of the Hang Seng Index has a strong positive correlation of approximately 0.6 with Hong Kong’s private consumption growth over the past three decades,” Fitch Ratings said in an earlier report.
In Queen’s Road Central, there are over 10 shops in the prime retail street that are presently vacant, setting the tone for the retail sector’s lacklustre performance of sales and rents well in December and even into 2019.
Retail sales picked up pace after rising 5.9% to $39.7b in October following 2.9% growth in September although the The latest reading marks the fourth consecutive month of single-digit expansion after a heated double-digit growth rally which can be traced back to February.
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