Hong Kong property

Influx of bridge and rail visitors from mainland China could boost retail leasing in Hong Kong, say experts

• The Hong Kong districts expected to benefit include Tsim Sha Tsui and Tung Chung

• Sectors such as food and beverage, pharmacies and health care could report a surge in sales

PUBLISHED : Wednesday, 21 November, 2018, 9:03am
UPDATED : Wednesday, 21 November, 2018, 9:03am

On Saturday, 103, 231 mainland Chinese visitors crossed the Hong Kong-Zhuhai-Macau Bridge on their way to the city, according to the Immigration Department, and this has led some market watchers to believe that an influx in tourists will rejuvenate Hong Kong’s retail leasing sector.

The districts expected to benefit include Tsim Sha Tsui and Tung Chung, and the sectors that could report a surge in sales include food and beverage, pharmacies and health care.

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“With boosted foot traffic and stronger demand, the rents in nearby districts in Hong Kong, such as those in Tung Chung and Lantau Island, are destined to increase in the coming few months,” said Lawrence Wan, senior director of retail at CBRE Hong Kong.

Retailers of cosmetics, health care items, electronics and watches and jewellery, which are oriented towards tourism as well, did their bit to boost leasing activity in Hong Kong this year, said Wan. And with this infrastructure in place, they now stand to gain from increased visitor numbers from the mainland.

But whether this increased traffic can translate into sustainable growth in rents and drive sales is yet to be seen.

“If the profit is good, this will be reflected in the turnover rents of landlords. In addition, it will take at least six to 12 months to find out if the benefits are for the long term, given the transport operations have stabilised by then,” said Cathie Chung, Senior Director of Research at JLL.

By 2020, another 420,000 mainland tourists will arrive in Hong Kong every year, as a result of the bridge. And with the completion of the Express Rail Link, an additional 2.1 million mainland visitors are now expected in Hong Kong every year, according to JLL.

Long-term benefits will also depend on what the government does to streamline operations, including the tightening of regulations and implementation of measures to cope with problems caused by the tourism influx.

“While the overcrowding situation in Tung Chung is yet to be solved, introducing new retail premises in the area can help to ease the pressure on the district,” said Melanie Kotschenreuther, research and advisory analyst at Colliers International.

Restaurants in Tung Chung have reported notable growth in traffic, with mainland Chinese visitors preferring to eat in the district before heading to the Hong Kong Boundary Crossing Facilities, where the dining options are relatively limited.

“There is only a sushi shop, a small restaurant and a convenience store there, so we prefer to grab a bite before travelling to the border, to avoid long queues,” said Kelvin Zhang, a 43-year-old visitor from Qingyuan.

In fact, food and beverage among all retail sectors has benefited the most from the increased visitor numbers: restaurants in the Jordan district of Hong Kong have been welcoming more tourists alighting from the high-speed train, according to JLL.

Lee, 54, who runs a small noodle shop in Tsim Sha Tsui, said there has been a surge in traffic to his shop since the debut of the high-speed rail. “Before its opening, the restaurant was mostly visited by office workers from the buildings nearby. But nowadays, there are many more mainland tourists.”

Restaurant companies in Hong Kong have expanded rapidly in recent years. “Dining groups such as Black Sheep Restaurants and Pirata Group are wooing customers with unique restaurant concepts and innovative marketing campaigns,” said Cynthia Ng, director of retail services at Colliers International. In addition, light refreshments will continue to perform well, with bubble tea being a particularly fast-growing sector, said Ng.

Citygate Outlets, an outlet mall next to Hong Kong’s airport, is doubling its floor area. “We aim to strike a balance, to cater to the demands of both tourists and Hong Kong residents, when designing our tenant mix. The new complex will feature a broad range of food and beverage outlets at various price points, including a food court. Once the new complex opens, the number of food and beverage offerings at Citygate Outlets will more than double,” said Chris Heywood, the outlet mall’s general manager.

The mall is also working with various mobile payment networks such as WeChat Pay to make the complex a mobile payment friendly one for visitors.

The Citygate Outlets extension is expected to open in the first half of 2019, while the new Skycity II near the AsiaWorld-Expo on Lantau Island, is expected to be completed between 2023 and 2027.