Hong Kong retail rents holding – for now

Prime retail rental rates are holding their own in Asia-Pacific despite increasing retailer caution according to CBRE.

And Hong Kong retail rents are holding their own – for now. The city has retained its place as the world’s most expensive retail market in the first quarter of 2015, ahead of New York and London, with Tokyo, Melbourne, Sydney and Beijing all featuring in the top 10.

Most expensive global retail markets

However, CBRE warns the overall retail market is expected to continue to shrink and leasing activity is expected to slow further.
Hong Kong’s retail environment weakened further and retail sales in January and February contracted by two per cent year on year (they have since recovered marginally, although luxury sales remain in significant decline). CBRE says this is attributed to changes in tourist spending patterns and concern over the outlook of visitor arrivals

Overall prime street shop rents in Hong Kong declined by 0.7 per cent in the quarter after slipping 0.2 per cent in the last three months of 2014.

“In the coming quarters, leasing demand is expected to be driven mainly by fast fashion or mid-market brands which are gaining popularity among both locals and tourists,” CBRE concluded.

Joe Lin, executive director retail services, CBRE Hong Kong, warned retail sentiment has further deteriorated in the second quarter, predicting a greater decline in prime rental rates has yet to come.

“The severe decline in the sales of luxury products such as watches and jewellery continued to curb expansionary demand from top-tier brand retailers. Therefore it is observed that landlords are becoming flexible towards rents,” said Lin.

“We foresee rents to go down in the second half of 2015.”

In the first quarter of the calendar year, several markets in Asia Pacific actually recorded prime rental growth, including Tokyo, Melbourne, Sydney, Ho Chi Minh City, Wellington and Manila. However, retail leasing activity in the region has weakened further as retailers turn more cautious.

Five out of the top 10 most expensive prime retail markets are located in Asia Pacific.

Top 10 most expensive retail markets

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