Hong Kong retail rental market to sink while Singapore’s swims thanks to quarantine-free tourist arrivals, end of Covid-19 restrictions
- Analysts predict rents for retail properties in Singapore will rise by 1 to 2 per cent this year, while Hong Kong will see a decline of between 5 and 15 per cent
- The Hong Kong market will not fully recover until the return of tourists, who account for up to 40 per cent of retail sales historically
Singapore and Hong Kong’s retail property segments are likely to see opposite fortunes this year, with the Lion City gaining an upper hand as it eases most Covid-19 restrictions and welcomes tourists back to its shores.
Rents of retail properties in Singapore are likely to rise by 1 to 2 per cent this year, while Hong Kong will see a decline of between 5 and 15 per cent, according to analysts.
The Southeast Asian financial hub has lifted travel curbs, done away with limits on gathering sizes, allowed employees to return to offices, resumed live performances, and reopened nightlife businesses.
In contrast, Hong Kong’s retail segment is likely to languish further, with the city sticking to strict quarantine procedures, even as it opened its doors to non-residents. Hong Kong still requires a seven-day quarantine for all international arrivals, deterring both business travellers and tourists.
“In the past, tourists accounted for around 40 per cent of the retail sales in Hong Kong,” said Thomas Chak, executive director, capital market and investment services at Colliers Hong Kong. “Hence it’s a crucial component for a substantial rebound for the high-street retail market.”
Singapore’s easing of its travel restrictions has begun to bear fruit. The city welcomed 121,193 international visitors in March, while Hong Kong received 1,800 tourists in the same month.
“In the coming quarters, consumer footfall and tenant sales are likely to increase” in Singapore, which “augurs well for retail operators, especially those located in downtown core and Orchard Road”, according to a Colliers report on Singapore’s retail rental market.
This means “retailers are likely to be more confident in their expansion plans, lending support to leasing demand”, the report said. “Consequently, the tightening of vacancy rates amid limited new supply should support a gradual recovery in retail rents from [the second half of 2022] onwards, although the pace of improvement could be tempered by persistent inflationary pressures and manpower shortages.”
Meanwhile, landlords of retail properties in Hong Kong are likely to see depressed rental rates because of several factors, according to Martin Wong, director of research and consultancy for Greater China at Knight Frank. These factors include large retail spaces where tenants have locked in lower rents, tenants becoming accustomed to concessions landlords have made to keep them in place, and tenants preferring either short-term leases or pop-up stores, Wong said.
“We will not see full recovery for the retail property segment this year, especially for retail rents,” he added. “Rents for prime-street shops are forecast to decline by 15 per cent, while those in shopping malls are likely to fall between 5 and 10 per cent.”
