These Hong Kong retail spaces are now being leased for up to 82% lower than their peak rents
Rents in Tsim Sha Tsui and Causeway Bay continue its downward trend.
Total retail sales in September 2022 inched up by 0.2% YoY to $28.1 billion, according to the Census and Statistics Department. For the first nine months of 2022, the total value of retail sales registered a mild decrease of 1.3% compared with the same period in 2021.
As sentiment remained weak, a Knight Frank report says retail rents in core districts like Tsim Sha Tsui and Causeway Bay continued to tumble. Numerous expired leases were not renewed, and street shops changed hands at ample losses.
Here’s more from Knight Frank:
In Tsim Sha Tsui, Matsumoto Kiyoshi, a Japanese pharmacy chain, will open its fifth branch with 6,000 sq ft on Kimberly Road and Carnavon Road. The new rent is reported to be 70% lower than the previous lease with SaSa.
Recently, shops 4-5 on 86-98 Canton Road, which had been leased by Mannings and previously Chow Tai Fook, are now asking for a monthly rent of HK$800,000, representing a 35% reduction from the previous lease and an 82% reduction from the peak level.
Likewise, Nanyang Commercial Bank recently leased a 2,500 sq ft shop in Hanley House, on Canton Road, for HK$720,000 per month, 78% lower than the market peak of HK$3.3 million in 2014 paid by cosmetics chain Bonjour. According to a market source, the lease has a fixed term of six years, with the right to renew for another three years. Such long-term leases were previously rare for prime street shops. This reflects that on one hand, landlords are desperate and more flexible in the present downbeat market, and on the other hand, that tenants believe rents have bottomed out.
We expect the recovery in the retail market to pre-pandemic levels to take considerable time. In the absence of Mainland Chinese visitors and foreign tourists, retailers have to rely on local consumption for the time being. It is difficult to see any upside at this point, with poor macroeconomic conditions compounded by the still-stringent border restrictions, which has undermined Hong Kong’s traditional role as a retail hub in Asia.
Looking ahead to 2023, we do not expect significant growth in the local consumption segment, but considering the gradual easing of border restrictions, we expect a rebound in retail sales with returning activity. The retail market will not regain momentum significantly until Hong Kong and the Chinese mainland fully reopen the border.