As rents decline to 2003 levels in major Hong Kong shopping districts, retailers lock in long-term leases at cheaper rents

Retail rents in some of Hong Kong’s main shopping districts have fallen to levels last seen in 2003 – and this has prompted some to lock in long-term leases for street shops.

Rents in Central, Causeway Bay, Tsim Sha Tsui and Mong Kok, four of Hong Kong’s major shopping areas, have returned to 2003 levels, when the city’s retail sector largely relied on local spending.

“Retailers think they can survive at current rent levels,” said Lawrence Wan, senior director of advisory and transaction services for retail at CBRE. Some even think they could make a profit in the next three to four years, once the border with mainland China reopens, he added.

Over the past 18 months, the sector has recorded its worst downturn on record. And as the likes of Topshop, Gap and JCrew have either exited or scaled down operations in Hong Kong amid political unrest and the Covid-19 pandemic, others are taking advantage of lower rents to expand or even move into better locations.

These retailers were also optimistic about a potential rise in consumption, Wan said. They were betting on spending sentiment being boosted by the rewards worth more than HK$80 million (US$10.3 million) being offered by the city’s business community to drum up interest in vaccinations, as well as the government’s electronic consumption voucher scheme being rolled out as early as August.

Retailers dealing in daily necessities and lifestyle products were committing to street shops because rents were so low, said Martin Wong, director and head of research for Greater China at Knight Frank. “They are expected to have a better sales performance than the luxury sector, whose sales rely highly on tourists,” he said.