A spokesman for Richemont Asia Pacific, the luxury goods group that owns the A. Lange & Sohne brand, yesterday said that market sentiment was behind the decision to pull out from the 1881 Heritage site a few months ago. 'Opening a new shop is a big investment. We have to consider market sentiment when making a decision.'

Leo Poon, the brand manager for Glashutte Original for North Asia, said: 'There is no final decision and we cannot say too much at the moment. We will make an announcement later.'

Sincere Watch (Hong Kong), the distributor of Franck Muller in Greater China, declined to comment.

A spokesman for Cheung Kong did not comment on the withdrawals saying only that the company signed no retail lease agreements in 2007.

However, Cartier and Tiffany & Co had executed the lease agreements and fitting out was under way.

Jeanette Chan, the regional director of retail at consultants Sandalwood, said: 'The market is very mixed. We have seen many international watch brands expanding at 1881 Heritage and iSquare in the same time.'

Mainland travellers are the main source of customers for the luxury watch industry.

A property agent said mainland travellers were more familiar with the bigger international brands, such as Cartier, and shopped accordingly. However, the lesser-known brands faced higher investment risk because of the poor market sentiment.

Meanwhile, developers are divided about the outlook for the retail market.

Hong Kong Sheraton Hotel in Tsim Sha Tsui owned by Hutchison Whampoa and Tai Cheung Holdings has delayed renovations planned for this year.

According to sources, the hotel last year planned to renovate the shopping centre and improve the connection with the MTR station in June this year. However, the plan is now on hold.

A spokeswoman for the hotel confirmed that the combination of still- running leases and the market sentiment was the cause of the delay.

'We had several renovation plans last year. But we won't renovate the shopping centre this year,' she said.

The spotlight is about to shine on the retail market in Tsim Sha Tsui as four large-scale shopping centres - iSquare, K11, 1881 Heritage and the Tung Ying Building redevelopment projects - are scheduled for completion over the next two years.

Eric Yuen, an analyst at Dao Heng Securities, said Nathan Road's image and position in the market was very different from Canton Road.

'But that will change when iSquare and the Tung Ying redevelopment are completed,' Mr Yuen said. 'This is the perfect time for Sheraton Hotel to take the six to 12 months needed to renovate its retail complex. If it launches with a new face at the same time as the other developments, it will attract more shoppers.'

Other developers such as Sun Hung Kai Properties, the Link Management and Swire Properties are doing just that to catch the revival they see coming in the next few years.

Maureen Fung Sau-yim, the general manager for leasing at Sun Hung Kai Real Estate, said the company would spend HK$40 million to renovate the apm shopping centre in Kwun Tong in the second half of this year. The project will be completed next year.

'We decided to renovate apm after the global financial crisis. It's our show suite in Hong Kong as we are developing the brand and the concept for the mainland,' Ms Fung said.

She said the company was optimistic about the outlook for the market as new retailers recorded 15 to 20 per cent growth in turnover after the financial crisis.

Scott Nugent, a project and development director with the Link Management, said there was a lot of potential in the company's portfolio and despite the global financial crisis, HK$1.13 billion had been earmarked for the renovation of 19 shopping centres by 2011.

Mr Yuen was upbeat, saying retail market rents and prices would outperform other property sectors.

'Although visitor arrivals dropped in recent months, I believe tourism spending will continue to go up this year,' he said.