Reshuffling of prime shopping street tenants in Hong Kong still ongoing
Hang Seng Bank recently took over a space previously occupied by Adidas.
Hong Kong’s retail sales rebounded for the second month in March, supported by improved local consumption sentiment, but the retail market is still challenging, given the continuing economic uncertainty and strict travel restrictions.
According to the Census and Statistics Department (CSD), total retail sales value rose by 20.1% YoY to HK$27.6 billion in March, slower than the 30.0% YoY increase in February. Online sales continued to constitute a significant portion of retail sales, totalling HK$2.1 billion in March, representing 7.7% of total retail sales value for the month. This was also 43.3% higher than in the same period last year, implying that consumers are increasingly opting for online purchases.
Thanks to the gradual relaxation of social distancing restrictions, Knight Frank says the F&B sector has seen an improvement in business. According to the CSD, restaurant receipts totalled HK$7.4 billion in March, rising by 16.4% compared to HK$6.4 billion in February. But for the first three months of 2021, the total value of restaurant receipts was still 8.8% lower than in the same period last year before the industry was affected by the pandemic, totalling only HK$19.7 billion.
Here’s more from Knight Frank:
Recently, Hang Seng Bank took over Adidas-vacated space in Queen’s Road Central at a deep discount. The bank will rent a total of 6,500 sq ft for two floors for HK$1.2 million per month. This reflected that the reshuffling of tenants in prime shopping streets is still ongoing. Retailers remained hesitant towards expansion though services trade such as banks who used to be expelled from core areas in the last 15 years are taking the opportunity now.
The declining number of coronavirus cases and the expansion of the vaccine programme are expected to lift consumption sentiment. But with the Hong Kong-Singapore travel bubble put on hold for the second time, the tourism industry is expected to revive only when the pandemic is completely over.
Given the challenges ahead, landlords are still generally cautious about the market outlook. However, because of a partial recovery in depressed retail sales, we think rental concessions are likely to taper off in the next few months. Landlords of prime shopping malls and prime street shops may also explore new leasing strategies to diversify the tenant mix, with the introduction of new elements targeting local consumers, such as pop-ups, culture and art, and experienced-based retail.