Concrete Analysis | Hong Kong sales rebound has retailers looking anew at expanding shopping space
Central is recovering its poise with prime spaces filling up, but secondary streets in the area may continue to see vacancies in the short term
Retail sales in Hong Kong are recovering strongly this year after a slump that began in 2016, as mainland Chinese visitors return to the city, spurring retailers to again think about investing in new premises.
In the first two months of this year, sales rose 15.7 per cent from the same period a year earlier, a stark contrast to what we saw through the majority of 2016 and parts of 2017, when retailers experienced sharp declines in their revenue, in some cases by up to 50 per cent as mainland tourists shunned the city and the central government cracked down on gift giving.
That decline meant the rents retailers could afford to pay to landlords in the prime shopping streets of Central and Causeway Bay corrected by between 40 per cent and 50 per cent.
The latest improvement still does not mean most retailers are approaching previous highs, but it is allowing them to make realistic predictions for their future business and thus invest.
We are seeing a great deal of interest from a variety of brands in expansion – luxury, affordable luxury and cosmetic brands are probably the most aggressive in the market at the moment. This will be a big relief not only to the brands and landlords, but also to the around 800,000 people who are employed in the retail industry in Hong Kong.
Assuming the growth trajectory continues, the overall market outlook is bullish, but there are some areas that remain a concern in the medium term, particularly secondary shopping streets where there are a large number of vacancies.