Hong Kong retail market not yet out of the woods: Knight Frank

But the leasing market is showing signs of gradual recovery.

According to a report released recently by Knight Frank, Hong Kong’s retail market continued to be soft against the backdrop of subdued economic conditions. Total retail sales value in January 2024 registered 0.9% growth YoY to HK$36.5 billion, lower than market expectations of 6.9%, the slowest increase in 14 months. 

“The reason for the low YoY growth rate was that the border was not fully reopened in January 2023, so most local residents stayed in Hong Kong during the Lunar New Year. However, many people went north to shop in January this year. The figures demonstrate that the Hong Kong retail market is not yet out of the woods and that conditions remain very difficult,” the report said.

Here’s more from Knight Frank:

Looking on the bright side, the retail leasing market showed more signs of a gradual recovery. Some vacated retail street shops in the popular tourist-driven areas, such as Causeway Bay and Tsim Sha Tsui, have been gradually filled by retailers. For example, a 1,000-sq-ft ground floor space in Russell Street, after more than two years of short-term tenancy, was leased for HK$300,000 (HK$ 300 per sq ft) per month to a pharmacy. 

Another example is a 2,497-sq-ft ground floor space in 3-6 Central Building in Central, which was leased for $700,000 (HK$280 per sq ft) to local premium eyewear brand Puyi Optical. Leasing activity was concentrated mainly in the core shopping districts, however, many neighbourhood areas are still struggling. 

In the latest Budget 2024, the government revealed that more than 80 mega-events with a variety of themes will be staged in Hong Kong in the first half of the year. The government also announced that it had earmarked HK$100 million to boost mega-event promotions over the next three years. 

Two more Chinese cities, Xian and Qingdao, were officially included in the Individual Visit Scheme to Hong Kong starting on 6 March. The potential increase in overnight visitors is expected to stimulate a recovery in the local food and beverages industry, and the hotel and aviation sectors. 

Retail sales in Q1 are expected to remain soft amid weak local consumption. Shop rentals in core retail areas are expected to remain under pressure while absorption is taking place slowly. In the long term, we are confident that the proposed mega-events will create more opportunities for retailers in related industries and attract more overseas visitors to Hong Kong.