bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

hooksAmpRedirectArticle

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

paywallTypes

createdDate

publishedDate

urlAlias

moreOnThisArticles

sponsorType

commentCount

authorLocations

authors

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

articleSpeeches

socialHeadline

headline

images

flag

firstTopic

glossary

flattenTypeIds

image

relatedLinks

relatedNewsletters

__typename

sponsor

pdfFiles

seriesReverseOrder

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

readingTime

customTimezone

liveContents

Vacancy rates for retail outlets, at their highest in three years in four shopping districts, will head higher still by early next year, but not enough to bring down rents by more than a modest amount, analysts say.
Research by consultancy Cushman & Wakefield shows 128 shops in Causeway Bay vacant this month, up 56 per cent from 81 in December.
“The vacancy rate in Causeway Bay is the highest since the outbreak of severe acute respiratory syndrome in 2003,” said Michele Woo, the firm’s executive director for retail in Hong Kong.
Vacant shops in Tsim Sha Tsui, another popular shopping district, have nearly doubled from 44 to 93 during the same period.
Vacancies in Mong Kok have surged 129 per cent to 48, and those in Central have jumped 62 per cent to 76.
The vacancies in shopping districts are mainly in second- and third-tier shopping streets, as the vacancy rate in first-tier streets remains low.
“But it is only a beginning,” Wu said. “Unless there is a new policy to stimulate retail sales, the situation will become even worse after Chinese New Year in 2015.”
While the retail market was booming and rents in first-tier shopping streets stayed high, Wu said, retailers would rent shops in second-tier streets at a higher rent so as to be present in the key shopping streets.
But now, they would rather open shops in new shopping districts if the returns in second-tier streets cannot justify the expensive rents.
“Although the landlords in second-tier streets have begun to cut their asking rents, it’s too late. Many retailers are losing interest,” Wu said.
The increasing vacancy rate is a result of falling retail sales. The latest data from the Census and Statistics Department shows retail sales dropped 4.1 per cent year on year in May, the third consecutive month in which they fell.
Luxury watch and jewellery retailers used to be the most aggressive in expanding in shopping districts and willing to pay a premium to rent a shop in prime shopping streets.
However, following a change in the shopping habits of mainland visitors, sales of watches and jewellery plunged 24.5 per cent year on year in May.
“It hit the business of local luxury watch and jewellery retailers the most,” said Jeannette Chan, regional director for retail at consultancy JLL. “They are not as aggressive in expansion as before. It left only affordable international luxury brands to remain active in seeking new shops.”

	We expect the rent in second-tier streets will drop 15 per cent this year, compared with our old forecast of 10 per cent

	Joe Lin, CBRE
Higher vacancy rates and slumping retail sales have  resulted in a drop in overall retail rents in shopping streets, but the decline has been mild.
Data from Cushman & Wakefield shows the average monthly rent in Causeway Bay’s major shopping streets dropped 1.6 per cent quarter on quarter to HK$1,800 per sq ft in the second quarter of the year. Rents in Tsim Sha Tsui fell just 0.7 per cent.
“Shop owners in second-tier shopping streets began to cut their asking rents in recent months,” said Joe Lin, senior director of retail services at CBRE. “But tenants had turned cautious in leasing already. The shops are still unable to find tenants. So we didn’t see a significant fall in rents.”
However, CBRE has revised its forecast for rents.
“We expect the rent in second-tier streets will drop 15 per cent this year, compared with our old forecast of 10 per cent,” Lin said.
Since many international brands are still looking for shops in first-tier locations, he said, rents in those streets would be flat. CBRE previously forecasted rents there would rise as much as 5 per cent this year.
Wu said the rents in first-tier shopping streets would continue to be supported by the watch and jewellery shops and would be stable in the second half.
 


Retail vacancies in Hong Kong soaring, but rents dip only slightly

The average monthly rent in Causeway Bay’s major shopping streets dropped 1.6 per cent quarter on quarter to HK$1,800 per sq ft in the second quarter. Photo: Sam Tsang

The average monthly rent in Causeway Bay’s major shopping streets dropped 1.6 per cent quarter on quarter to HK$1,800 per sq ft in the second quarter. Photo: K. Y. Cheng

Hong Kong’s status as retail hub safe for now

Mid-tier retailers such as Topshop are expected to benefit from a consumer trend towards so-called affordable luxury. Photo: Bloomberg

A proposed curb on visitors from the mainland is one of the headwinds facing the retail leasing market. Photo: David Wong

Hong Kong year-on-year retail sales show 4.1 per cent drop for May

Jewellery on display at an outlet in Jordan. Photo: Nora Tam

Retailers downsize as luxury sales slump

In the face of slowing sales of luxury goods to mainlanders, retailers are turning cautious in their rental spending. Photo: EPA

Drop in retail sales biggest in five years as surge in number of mainland visitors slows

Staff wait for customers at a jewellery shop in Causeway Bay – sales of the luxury items fell almost 40 per cent in April. Photo: Nora Tam

Harry's view

Property

Hong Kong & China