Tsim Sha Tsui saw rents decline 5 per cent year on year as retailers in the city struggled amid Covid-19 restrictions and depressed visitor numbers while the border with mainland China remains closed.

Rents in Hong Kong’s other major shopping district, Causeway Bay, fell 7 per cent over the past year and 49 per cent since before the pandemic to US$1,292 per square foot, according to the report. This puts Causeway Bay in second place in Asia-Pacific behind Tsim Sha Tsui. The district does not appear in the global top 10 as Cushman only lists one district per city.

“Vacant shops prevail in Hong Kong’s two traditional shopping districts as mainland tourist arrivals in Hong Kong are still at a very low level,” said Kevin Lam, Cushman’s executive director and head of retail services in Hong Kong.

Overall, high-street rents remain under pressure even though the rental correction trend is stabilizing, Lam said.

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“Against this backdrop, we have seen a change of the trade mix in prime retail locations,” Lam added, citing a transition in Causeway Bay from luxury retailers to shops catering to lifestyle needs and local spending.

At this moment, lower rents are not really bad, said Martin Wong, head of research and consultancy for Greater China at Knight Frank.

“Lower rent can at least support the occupancy rate, and thus the streets do not have so many vacant shops, which looks bad,” Wong said. “The rents will adjust themselves and go up when retail sales are actually back. But at this moment, when reopening with mainland China is still a question mark, slashing some rents to lure some tenants is not a bad choice.”

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Rents have stabilised and will be on the rise starting in the second or third quarter next year, said Oliver Tong, head of retail at JLL in Hong Kong.

“I feel the market sentiment is on the right track, and as long as there will be further relaxation of the travelling scheme, the Hong Kong market will quickly rebound,” Tong said.

Hong Kong remains an important luxury retail destination because of its lack of sales tax, reputation of authenticity of products and local purchasing power, as well as its shopping culture, Tong added.

“However I do see competition amongst other countries and cities rising, and it is very important for the government to realize the upcoming challenges and ensure the right strategies to attract good quality visitors are in place,” he said.

Four other Asia-Pacific shopping districts appear in Cushman’s top 10 ranking: Tokyo’s Ginza (sixth), Sydney’s Pitt Street Mall (eighth), Seoul’s Myeongdong (ninth), and Shanghai’s West Nanjing Road (10th).

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Globally, average rents in the world’s major retail markets have recovered to 6 per cent below pre-pandemic levels as of the third quarter of 2022, according to the Cushman report. Though the Asia-Pacific region has yet to rebound, its rents recovered slightly from the lowest level and are 12 per cent below the pre-pandemic level.

“Countries in Asia-Pacific took a more stringent approach for inbound travel and some of them are more reliant on domestic consumption,” said Rosanna Tang, Cushman’s executive director and head of research in Hong Kong.