Retail grows 5.1% as office leasing still drags: UOB

Local spending lifts sales whilst earnings rely on costs.

Retail sales returned to positive growth of 5.1% YoY between July and November 2025, driven by a 7.2% increase in local discretionary consumption, according to UOB Kay Hian.

Visitor spending remained a secondary support, with per capita shopping spend still declining YoY in the third quarter of 2025, albeit at a slower pace, UOB Kay Hian said.

Hong Kong Tourism Board data cited by the brokerage showed total tourist shopping expenditure rising 2.1% to $17.2b, accounting for 18.8% of retail sales, largely due to a 12.2% increase in visitor arrivals.

Office markets continued to face rental pressure, though early signs of stabilisation emerged in the second half of 2025, according to UOB Kay Hian.

Grade A office rents declined 1.4% in both Sheung Wan and Wan Chai and 3.7% in Tsim Sha Tsui during the third quarter, whilst consultancy data pointed to smaller effective rent declines and the first month-on-month rent increases in Central since May 2022.

UOB Kay Hian expects rental recovery to lag retail sales, with base rents typically adjusting six months after sales improvements, and positive office rental reversions unlikely before 2027.

Near-term earnings momentum for landlords is expected to be driven by lower financing costs, cost optimisation, and capital recycling rather than rental growth, the brokerage said.