Hong Kong’s retail space vacancy rate to stabilise as global brands boost local presence to reconnect with target consumers

Some retail and lifestyle stores are expanding their local presence to connect with their target customers in the post-pandemic era, Cushman says

Rents for high-street shop space have risen in the past three quarters, as border reopening revived retail sales by 19 per cent so far this year

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Shoppers on a busy street in Causeway Bay, Hong Kong in July 2023. Photo: Yik Yeung-man

Published: 7:30am, 16 Oct 2023Updated: 9:58am, 16 Oct 2023

Changing spending behaviours of tourists and local consumers in the post-pandemic era are bringing new tenants to Hong Kong’s rental market, helping temper vacancy rates across the city’s commercial properties, according to industry consultants.

With many people turning to online shopping, those who visit physical stores now tend to focus on the experience and services, according to Kevin Lam, executive director and head of retail services in Hong Kong at Cushman & Wakefield. Some global brands are looking to make their presence felt, he added.

“Some retail and lifestyle stores chose to expand their [bricks and mortar] locations in Hong Kong,” Lam said. A Scottish whiskey distillery and Dubai-based carrier Emirates leased space in the third quarter, he added, to boost their physical presence and connect directly with their target audience.

Kevin Lam, executive director and head of retail services in Hong Kong at Cushman & Wakefield. Photo: Handout

The retail vacancy rate in Hong Kong is expected to remain steady in the fourth quarter, with rentals rising by 5 to 10 per cent, according to forecasts by Cushman & Wakefield. The broader property market remains in limbo for now, given the slow economic recovery and high borrowing costs, Lam added.

Leasing volume for high-street shops fell by 14.4 per cent to 368,000 sq ft in the third quarter from the preceding three months, according to CBRE. Restaurants, cosmetics shops and pharmacies were among the most active businesses, contributing 41 per cent of the volume transacted, it added.

Hong Kong’s retailing industry improved this year as businesses profited from the border reopening in January. Total citywide sales through August grew 19 per cent year on year to HK$270.5 billion (US$34.6 billion), according to the statistics department.