More pain ahead for Hong Kong retailers as residents flock to Shenzhen for cheaper goods, slowing recovery

Vacancy rates in Sheung Shui and Yuen Long in the northwestern part of city have risen as locals prefer to shop across the border, Midland report shows

Hong Kong resident departures totalled 15 million in January and February, matching the volume in 2019, Colliers said

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Shoppers at KK Time mall in Shenzhen. Photo: Xiaomei Chen

Published: 7:26pm, 22 Apr 2024Updated: 7:35pm, 22 Apr 2024

Hong Kong’s economic recovery is slowly filling up retail spaces in the city, pushing vacancy rates to a three-year low. The rebound, however, is bypassing the northwestern part of the city because of the attraction of cheaper goods and services in Shenzhen and neighbouring mainland Chinese cities.

The overall retail vacancy rate dropped to 9.6 per cent in March from 10 per cent a year ago, and is likely to hold steady over the next six months, according to the latest report by Midland IC&I. In Yuen Long, vacancy increased to 7.1 per cent from 5 per cent over the same period, and worsened from 6.4 per cent to 8.3 per cent in Sheung Shui.

“The value of retail sales in Hong Kong has rebounded and the retail industry in the four core areas has continued to recover,” the commercial property agency said in the report on Monday. However, the trend of consumers travelling north “has caused the livelihood in areas near the mainland to be greatly affected,” it added.

The trend has persisted since last year, as noted by Cushman and Wakefield. Shopping streets and malls along the East Rail Line – which connects Lo Wu and Lok Ma Chau in the northwestern part of Hong Kong and Shenzhen – suffered as much as a 30 per cent slump in sales, the property consultancy firm added.

A customer browses at an apparel shop in Mong Kok. Photo: Yik Yeung-man

Some 7.8 million tourists visited Hong Kong in January and February, which was equivalent to 63 per cent of the level seen in 2019 before the Covid-19 outbreak, according to data published by the city’s tourism authority. At the same time, Hong Kong resident departures totalled 15 million in the same period, matching the flow in 2019, according to property consultancy Colliers.

There has been an “upsurge in Hong Kong people heading north for consumption,” Midland said. “Many people will go to the mainland for dining, entertainment and other leisure activities [and] to large supermarkets on the mainland to buy daily necessities. The livelihood in areas [on the Hong Kong side] near Shenzhen will be most affected.”