What you need to know about Hong Kong’s retail sector

Some large retail shops remain vulnerable in terms of leasing.

Hong Kong retail sales across various categories remained weak. According to Knight Frank, the total retail sales value recorded a 9.7% YoY drop to HK$29.9 billion in June 2024, marking a 6.6% YoY decline in H1 2024 compared to the same period in 2023. 

With continued low tourist spending and weak local consumption, total sales value of clothing, footwear and allied products saw a 12.7% YoY decline, while jewellery, watches and clocks, and valuable goods tumbled by 23.1% in June 2024. 

Here’s more from Knight Frank:

In core shopping districts, some large retail shops which used to be leased by large retail brands are still vulnerable. Landlords have to either accept short-term lease agreements or sublet to multiple tenants. Luxury watch retailer Oriental Watch gave up its flagship location at ground floor Shop B & C, Hennessy Apartments, Causeway Bay after leasing the space for about 20 years. The gross area of the shop is about 6,500 sq ft. It is now under a short-term leasing agreement of HK$200,000 per month with a stationary retailer. 

On a positive note, apparel retailer Abercrombie & Fitch Co., is planning return to Hong Kong eight years after it shut its flagship store in the city. The company will lease two large retail units in prime locations, including a 7,000 sq ft space in Hysan Place, Causeway Bay and a more than 10,000 sq ft space in New Town Plaza, Sha Tin. 

Restaurant operators are also bearing the brunt of lower spending because of northbound travel by locals. Restaurant receipts by value dropped by 15% QoQ and 5% YoY in Q2 2024. A few multinational chains have downsized or terminated their operations in Hong Kong. Outback Steakhouse closed nine locations across Hong Kong, and Taiwanese hot pot restaurant Tripod King and Japanese Okonomiyaki Dohtonbori Restaurant under the Wellcore Group ended their operations in Hong Kong. 

The overall retail market remains challenging, given the weak total retail sales and restaurant turnover, which have been negatively affected by the northbound travel habits of many local residents. Meanwhile, investors are expecting a rate cut in the near future and anticipating more capital inflow to activate the market. Looking ahead, as the National Holiday and other holidays approach, more tourism activity is expected, which will attract more footfall and spending to close out 2024.