Mainland Chinese's declining spending hits rents for Hong Kong's street-level shops

Rents for street-front shops in prime locations are plunging as tenants and landlords adjust to a fall in mainland visitors that has triggered a slowdown in the growth of retail sales in the city.

Retail sales by volume were up 10.2 per cent year on year in March, down from a growth rate of 21.9 per cent in February, according to the latest government data. Growth in sales of jewellery, watches and high-priced gifts slowed even more sharply, falling from 27.9 per cent in February to 9.8 per cent in March.

Official data for April is due out this week, but retailers of expensive watches and jewellery say sales of items priced between HK$1 million and HK$5 million have dropped by as much as 15 per cent since March as the slowing mainland economy and Beijing's campaign to curb extravagant spending by officials cut into spending by mainland visitors.

"For the past several years, the aggressive opening of new jewellery and luxury watch stores in locations such as Causeway Bay saw landlords lifting rents for ground-level shops sky high … to cash in on an influx of mainland shoppers," said Yam Wing-yin, chairman of real estate agency Sheraton Valuers, which specialises in selling and leasing shops.

"Today landlords have become more realistic and are lowering their asking rents."

Tenancies up for renewal are being negotiated at big discounts to the jaw-dropping rent rises originally sought by landlords.