The View | How Hong Kong’s retail sector can up its game on the road to recovery

Persistently high rents, rising levels of outbound travel and an inability to respond to changing consumer tastes are holding back Hong Kong’s retailers

The city’s retail industry must be revitalised and better tap into Hong Kong’s unique strengths to make any recovery meaningful and durable

Reading Time:4 minutes

A worker cleans up a shop which has gone out of business in Wan Chai on October 18. High street shop rents in core districts grew 2.4 per cent in the third quarter, but the recovery of the retail sector still has some way to go. Photo: Elson Li

Published: 4:30pm, 4 Dec 2023Updated: 4:37pm, 4 Dec 2023

Divergences within Hong Kong’s commercial property industry are growing. Just a cursory glance at the performance of the two main sectors makes it clear which one has fared better since the dramatic reopening of mainland China’s economy a year ago.

In the office market, rents for grade A buildings continue to fall, dropping a further 1.4 per cent last quarter, the 18th straight quarterly decline. Capital values, meanwhile, fell 7.4 per cent in the first three quarters of this year while being battered by the sharp rise in interest rates, according to CBRE data.

However, in the retail market, high street shop rents in core districts grew 2.4 per cent in the third quarter, underpinned by the rebound in visitor arrivals, particularly from mainland China, that has revived tourist-related trades. The increase in rents – which CBRE expects will grow 5-10 per cent for the year as a whole – contributed to a 4.5 per cent rise in high street shop capital values in the first three quarters.

In a report published on October 12, Morgan Stanley said it favoured Hong Kong retail landlord stocks over their office peers because of the growing divergence in rents between the two sectors.

However, the ailing office market is not the yardstick to judge the performance of the retail sector. The best measure is the effectiveness of the sector’s response to shifts in the competitive landscape of the global retail industry, particularly those emanating from mainland China.

There are three threats to the recovery and a huge opportunity that must be seized for Hong Kong’s retail sector to appeal to both domestic consumers and tourists.

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.css-1m2rp1p{color:#34b8b5;}The View | How Hong Kong’s retail sector can up its game on the road to recovery

The View | How Hong Kong’s retail sector can up its game on the road to recovery