An increasing supply of retail space has dragged down sale prices and rental rates, according to First Pacific Davies (Hong Kong). In the third quarter, prices fell 4.9 per cent, while rents dropped 4.6 per cent. First Pacific said retailers were tending to move to large shopping centres with those well located performing better. Investors and speculators were more interested in ground floor shop space in prime locations in Tsim Sha Tsui and Mongkok, it said. 'The retail market is very much a tier market,' associate director and head of research, Simon Smith, said. 'The top tier is fairly insulated with demand remaining strong for well-managed retail developments in accessible areas.' He said there was underlying strength in the retail property market, particularly for large shopping centres. New centres were offering a whole entertainment package because people wanted to do more than just shop. Developers were becoming more innovative with their shopping centres and confident any centres offering additional entertainment facilities would outperform the market, Mr Smith said. One such centre is the Metro City Shopping Centre.