Concrete Analysis | Innovation is key to the changing world of Hong Kong retail

Hong Kong has one of the most vibrant retail markets in the world. While it has certainly evolved over the years, the city has traditionally been regarded as a ‘shopping paradise’.

However, more recently, indicators suggest that the decade-long luxury shopping era is coming to an end: vacancies are becoming more common in retail properties and, left with little choice, landlords are lowering rents and having to scramble to find suitable tenants.

In fact, during 2016, rents for street-level stores in major shopping districts dropped by 11.5 per cent – on the back of an even more dramatic 17 per cent drop the previous year.

In aggregate, the decrease in retail rents stands at around 30 per cent over the past two years, and even this figure is an average. Certain areas more sensitive to the decline in spending by mainland Chinese visitors have seen rents drop by over 50 per cent from the peak.

Much has already been said and written about the ‘new normal’ in the local retail industry, and I don’t plan to repeat those observations here.

One trend that has received less public attention, however, is the use of revitalised industrial buildings for retail, predominantly by F&B tenants as well as a whole host of other purposes such as co-working spaces, gym, and even the new concepts – edutainment/retailtainment.