Bad news for small shopkeepers - Hong Kong still has the most expensive prime retail rents in the world, according to property consultancy CBRE.
At US$4,335 per square foot a year in the fourth quarter last year, the average rent for a prime shop was well above second-placed New York, where rents were 46 per cent lower at US$2,970. London came in third at US$1,080 per sq ft.
Rents in Hong Kong edged up US$1 per sq ft from the third quarter "to defy a deceleration in retail sales due to the current global economic uncertainty", CBRE said. The figures mean retailers in Hong Kong are paying HK$2,800 per sq ft per month on average for a prime retail spot.
The city's rents were driven to record highs due to the influx of wealthy mainland tourists, the expansion of luxury retailers and a shortage of prime space, CBRE said.
But it warned that many retailers had become less aggressive with their expansions or entry plans given the high rents.
"Local retailers, who are not primarily targeting tourists, cannot afford the increasing rents and in some cases are forced to relocate, which is resulting in less choice in prime districts," Joe Lin, CBRE's senior director of retail in Hong Kong, said.
"However, mainland tourist spending was beginning to slow towards the end of last year and rents are not anticipated to rise dramatically in 2013 given their already high levels."
Some small restaurants and shops have been forced to shut because of soaring rents. Last week Lei Yuen Congee Noodles, behind Sogo in Causeway Bay, closed its doors after the landlord doubled the rent to HK$600,000 a month.
There is talk in the market that US fast fashion retailer Forever 21 has leased the four-storey King Wah Centre in Mong Kok for HK$6 million a month.
In the office market, real estate broker Colliers International found overall grade A office rents dropped 2.3 per cent in the final quarter, largely due to softening demand for premium office space in Central.
But the firm projected that overall grade A office rents would rebound 4 per cent this year because there were signs of increasing leasing activity.
"The improved business conditions will encourage business expansion plans," it said.
Rental performance in Central and East Kowloon would outperform the overall market slightly, it forecast, with stable economic conditions driving the grade A office market.