Here are some retail investment opportunities in Hong Kong

These investments offer attractive rental yields despite ongoing challenges.

The retail leasing market trend for food and beverage outlets in Hong Kong the first half of 2024 is mixed, said Knight Frank in a report. On the one hand, the trend of store closures was visible.

According to data from the Food and Environmental Hygiene Department, the total number of General Restaurant Licences and Light Refreshment Licences declined by 2.0% from January to June 2024. On the other hand, some restaurant brands, particularly from the Chinese mainland, expanded rapidly into Hong Kong, only to find that their turnover was insufficient to overcome the high rents. 

Here’s more from Knight Frank:

Despite the prevailing challenges, investment opportunities still exist for retail properties that offer attractive rental yields. A state-owned conglomerate, CR Longdation, acquired two retail podiums, KF88 in Kwai Chung and the recent purchase of a retail section at Alto Residences in Tseung Kwan O. The rental return was above 6%, with occupancy rates at almost full capacity. 

Additionally, a ground floor unit in Prince Commercial Building was sold for HK$52.5 million, with a yield of 5.6%. As investors await potential rate cuts, they are seeking retail properties with yields above 5.5% to provide a cushion against short-term uncertainty. 

On a positive note, Chinese Mainland EV brands are actively expanding into Hong Kong’s retail market, focusing particularly on showroom space in highly visible sites in areas such as Wan Chai and Kowloon Bay. Notably, some motor operators are also renting short-term exhibition space in shopping malls to test market sentiment without committing to long-term leases. 

As we enter the summer holiday season, retail sales typically slow down as locals go on vacation. Looking ahead, retail sales will require an 8–10% growth in 2H 2024 compared to the same period in 2023 to match last year’s total retail value of HK$407 billion. This will be challenging as there is currently limited market stimulus.