Hong Kong property

Majority of retailers ready to open more outlets as rising sales boosts their confidence, finds JLL survey

PUBLISHED : Tuesday, 17 July, 2018, 8:01am
UPDATED : Tuesday, 17 July, 2018, 7:22pm

Eight out of 10 retailers plan to expand as sales in the first half have increased appreciably and are expected to grow further, thanks to a rise in tourists and an uptick in local consumption.

Eighty-three per cent of international and local retailers have plans to open new stores in Hong Kong over the next 12 months, up from 62 per cent a year ago, according to a survey released by JLL on Monday.

“There is a great deal of positivity in the market at the moment,” said James Assersohn, director of Asia-Pacific retail at JLL. “Retailers from almost all sectors are seeing strong and sustained growth in their sales which will lead to them invest more into the market.”

JLL surveyed 40 retailers last month and found that more than 90 per cent of the respondents saw sales in the first half fare better than last year. They were also upbeat that sales would grow by more than 10 per cent in the second half.

Roberto Sergi, managing director for Greater China at Italian women’s fashion brand Pinko, said the label was “experiencing very strong double-digit growth” in sales in Hong Kong.

“We see the current market conditions as a great time to expand our business further and are currently exploring opportunities for this year and next,” said Sergi.

The retail market has witnessed strong recovery since 2017 as the industry has received a boost from strong tourism and upbeat consumer sentiment.

Retail sales recorded a fourth consecutive month of double-digit growth in May, jumping 12.9 per cent to HK$40.5 billion (US$5.1 billion), according to The Hong Kong Retail Management Association.

“The luxury sector is currently the biggest winner, led predominantly by the mainland Chinese tourists,” said JLL’s Assersohn.

Meanwhile, retailers and shopping malls are adopting millennial-centric strategies that focus on

experiential shopping and digital platforms.

“Changing consumption patterns and shopper profiles fuelled by millennials and Generation Z have led to greater demand for mass and mid-market brands, serving as a significant boost to local spending,” said Assersohn.

JLL also noted that even though the presence of affordable brands is growing in major shopping districts at a swift pace and will remain one of the main sources of leasing demand, the bulk of leasing demand continues to be from retailers with lower rent budgets.

“We believe a V-shaped recovery in retail rents is unlikely to happen in the short term. We expect the rents of high street shops and prime shopping centres to grow in the range of 0-5 per cent for the full year,” said Terence Chan, head of retail at JLL in Hong Kong.

Colliers also noted that while landlords with properties on first-tier streets in core shopping districts have witnessed strong demand, second and third-tier streets remain weak because of higher vacancies, with rents only starting to gradually pick up now.

Martin Chan, associate director at Ricacorp (CIR) Properties, however said he did not believe that as many as eight out of 10 retailers would have plans to open new stores in the city in the coming year.

“The ratio [of retailers looking to open new stores] does not even hit 20 per cent from my [past] experience,” said Chan.