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A man walks past closed retail shops in Mong Kok on September 19, 2022. The shop vacancy rate stood at 11.2 per cent in July and August, according to Midland ICI. Photo: Edmond So

Hong Kong to see stronger demand for shop space under expected end of mandatory hotel quarantine, property executive says

  • One in nine street-level shops in Hong Kong was vacant during a survey in July and August
  • Shop vacancies should drop by a third by early next year if hotel quarantines end, a property executive says

One in nine street-level shops in Hong Kong was vacant during a survey in July and August, but demand for shop space should strengthen by early next year if the city relaxes quarantine rules for incoming travellers, according to a property executive.

If the proposed “0+7” arrangement, under which people arriving in Hong Kong would no longer face mandatory hotel quarantine, goes into effect, the number of vacant shops may fall by about one-third by next March, said Tony Lo, executive director and CEO (ICI Property) of Legend Upstar Holdings, the parent company for Midland IC&C.

Even if the arrangement is only available to foreigners and the border with mainland China remains closed, the quarantine change is “better than nothing”, he said.

“While the hardest hit industries, such as cosmetics, jewellery and watches, largely depend on mainland tourists, more foreign tourists coming to Hong Kong will anyway boost the retail and food and drinks industry,” Lo said.

Many commercial units stand empty at Park Lane Shopper’s Boulevard at Tsim Sha Tsui on May 31, 2022. The owners submitted an application to turn the 300-metre long, 50-store complex into a food and beverage destination. Photo: Jelly Tse

A survey by Midland ICI found a total of 845 vacant shops in the four core areas of Causeway Bay, Central, Tsim Sha Tsui and Mong Kok from July to August this year. That is a slight increase from 829 in the first quarter of the year and the highest since 867 in the first quarter of 2021. The vacancy rate rose slightly from 11 per cent in March to 11.2 per cent in the latest survey, the highest figure since it reached 11.5 per cent in the first quarter of 2021.

The survey covered 223 streets with a total of 10,144 street shops, including 7,528 in the four core areas. The results reflect the initial impact after the government implemented the current “3+4” quarantine arrangement, as well as the early stages of the distribution of the second phase of consumer vouchers and the recent increase in infections.

The vacancy rate will fall to about 8 per cent and the number of vacant shops will fall to about 600 shops across Hong Kong by around March next year, after the Christmas and Lunar New Year holidays, Lo said.

Why restaurants are replacing shops, changing Hong Kong’s retail landscape

Lo’s remarks came after Hong Kong Chief Executive John Lee Ka-chiu said Hong Kong would create “ maximum room” for the city to reconnect with the world. His pronouncement has been viewed as the strongest sign yet that the hotel quarantine requirement for international arrivals will be scrapped soon.

“Apart from the poor global economy, pessimism has simmered in Hong Kong,” Lo said. “Hong Kong is very sensitive, as it’s an external economy. If the “0+7” arrangement is suddenly announced, people will find it hopeful to travel with the border reopened. At least it is a step forward. The immediate market reaction will improve.”

The restaurant industry has seen setback in growth since being hit hard earlier this year by the fifth wave of the outbreak, coupled with the delay in border reopening. Compared to the first quarter, the four core areas saw a net decrease of 15 restaurants in the most recent survey.

Meanwhile the performance of retail industries such as clothing, cosmetics, personal care and pharmaceuticals remains weak.