Retailers redraw Hong Kong expansion plans as rents drop

Six out of 10 international and local retailers plan to open new stores in Hong Kong next year, after rents in core shopping districts have plunged 41.2 per cent from the market peak in 2014, according to a survey conducted by JLL.

JLL said it had surveyed 50 international and local retailers and found that half of the respondents believe Hong Kong’s retail market has bottomed and will recover next year.

Although all retailers believe high-street rentals are still overvalued, 62 per cent of them have expansion plans. Retailers were evenly split between those who prefer to open a new store in shopping malls and those who prefer street-level shops.

“Hong Kong’s retail market is still challenging but the mood among retailers has changed from pessimistic last year to believing the worst is over and there are now opportunities,” James Assersohn, local director of retail at JLL in Asia Pacific, said.

Property agents see an unusual trend in Central’s retail leasing market

He said Hong Kong is immensely important because it is a very strong domestic consumer market and

because it offers exposure and access to the mainland Chinese market.

“Tourist numbers are bouncing back. Hong Kong’s rentals have come down and still need a small amount of correction to create an equilibrium. However, business is booming for many retailers and the reduced rentals have left a great opportunity to get prime retail space. As our survey suggests, retailers are seeing this as a great time to take advantage of the market conditions and acquire more space,” he added.

Online shopping in Hong Kong is less popular than in other cities. But 72 per cent of respondents believe Hong Kong consumers will embrace it in the next five years.

Terence Chan, head of retail at JLL in Hong Kong, said: “Landlords are now willing to offer flexible

leasing terms to the retailers if the image of the brand is good. The rental correction has created

opportunities for more retailers to enter the market, and for landlords to diversify their tenant mix. It has also helped many retailers to open crossover stores to create a new shopping experience.”