Concrete Analysis | Hong Kong landlords adjust rent expectations as pandemic reshapes retail landscape amid changing consumer preferences

In the past year, Hong Kong’s retail sector recorded the worst performance in a decade, as months of social unrest, followed by the Covid-19 pandemic drove tourists away, hit consumer spending and threatened the survival of many retail businesses. These crises have not only greatly disrupted Hong Kong’s retail sector, but they have also driven significant changes to the local consumer and retail market landscape.

The most visible yet dismal retail scene in the past year was probably the abundance of vacant shops that appeared across core shopping districts in Hong Kong. In the face of the tough retail environment, prime retail streets, such as Queen’s Road Central, Russell Street and Canton Road have witnessed a spate of store closures as many international and luxury retailers scaled back their retail footprints or retreated from the Hong Kong market, resulting in an all-time high vacancy rate.

These prime shopping streets used to be the priciest locations in the world for first-tier international or luxury brands to set up their iconic flagship stores. In Queen’s Road Central, for instance, international brands such as Adidas, Topshop, Swatch, GAP and Esprit closed one after another in the past year. Based on Knight Frank’s research, the street had more than 14 vacant shops by the end of December, an alarming and unprecedented situation in this prestigious area.

In Queen’s Road Central, Japanese discount retailer Don Don Donki rented a 17,800 sq ft space for its fifth outlet in the city. Value-priced French sporting goods chain Decathlon rented a 9,300 sq-ft shop previously taken by MCM on the ground floor and basement of 30 Queen’s Road Central. Based on market news, the rent is reported to be at least 50 per cent less than that paid by MCM, falling back to the level during the Sars (severe acute respiratory syndrome) period in 2003-04.