How demographic changes will impact Hong Kong’s retail market

The aging population is impacting supermarket retail sales performance.

Hong Kong's retail market is experiencing a significant decline, with total retail sales in the first ten months of 2024 estimated to have dropped by 7.1% compared to the same period last year, according to Knight Frank.

“This weakness extends beyond luxury spending; even sales of necessities at supermarkets are showing a cautious trend. It is anticipated that total retail sales for the year may decline by 5% compared to last year, further increasing the pressure for retail rent and price adjustments,” said Helen Mak, Knight Frank Senior Director, Head of Retail Services.

Here’s more from Knight Frank:

The retail industry in Hong Kong is facing the impact of significant demographic changes. Government statistics indicate that between mid-2018 and mid-2024, the population aged 20 to 59 has decreased by 354,000, while the population aged 60 and above has significantly increased.

These demographic shifts, along with the rise of online shopping, are directly impacting the performance of supermarket retail sales. Moreover, global economic uncertainty and the underperformance of the local residential market are accelerating the trend of downgraded consumption in Hong Kong.

In addition, mainland tourists have historically played a pivotal role in propelling Hong Kong's retail market. Recently, the government is revamping visa arrangements for mainland residents visiting Hong Kong. Although these measures are expected to attract more mainland tourists, current visitors tend to prefer in-depth cultural experiences, which naturally affects luxury goods sales.

Overall, retail consumption in Hong Kong has not recovered as expected, leading most retailers to adopt a cautious attitude towards expansion. While the decline in retail rents next year may not be significant compared to 2024, rents will continue to be stable due to demographic changes and shifts in the consumption patterns of mainland tourists. However, the upcoming Kai Tak Sports Park is expected to enhance the appeal of local experiential consumption, attracting more local customers and tourists to spend in Hong Kong.