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Crunch time for HK retailers, landlords
Hong Kongâs retail market is at the crossroads as retailers and landlords scramble to adjust their operations and leasing strategies to cope with market changes brought by dwindling mainland visitor arrivals and luxury goods sales
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ong Kong's retail market is at the crossroads as retailers and landlords scramble to adjust their operations and leasing strategies to cope with market changes brought by dwindling mainland visitor arrivals and luxury goods sales.
Global commercial real-estate services provider Colliers International expects street-level retail rents in the city's four prime shopping districts - Causeway Bay, Central, Mong Kok and Tsim Sha Tsui - to drop by 15 per cent this year after a full-year decline of 5.5 per cent in 2014.
In the first half of 2015, retail rents in the four districts plummeted 10.5 per cent, going back to mid-2011 levels, Colliers International said.
Rental levels in the key shopping areas had peaked in May 2013, but began to fall amid faltering retail sales due to curbs on visits by Shenzhen residents and the mainland's ongoing anti-corruption campaign, which have resulted in less conspicuous consumption and a shift in mainland visitors' consumption patterns focusing more on daily necessities.
The SAR's retail sales have relied heavily on mainland visitor arrivals since the launch of the Individual Visit Scheme in 2003. Census and Statistics Department data revealed that mainland-tourist expenditure accounted for 36 per cent of city's total retail sales in the first half of last year. Mainland-visitor arrivals in July, however, plunged 8.4 per cent - the largest single-month decline in six years.
'Landlords are facing the reality that retail sales are slowing down and that they have to cut rentals but shorten tenancies to enable them to retain retail brands. At the same time, they are seeking new tenants who are prepared to pay higher rents,' said Helen Mak Hoi-lun, retail services senior director at Colliers International.
'However, we do not see landlords aggressively cutting rents,' she said.
With Hong Kong's July retail sales figures due to be announced next Monday, total retail sales in the first half of this year have dropped 1.6 per cent, while sales of luxury goods had tumbled 15.9 per cent during the same period.
Landlords have been forced to revise their leasing strategies, and retailers and shopping mall operators have to modify their business modes to prop up business as sales slump.
Linda Lin Dan, retail services director at Colliers International (Shenzhen), said retailers should create more 'cross-over' shopping opportunities for customers, such as blending shopping and dining experiences to drive sales.
For mall operators, more are developing mobile apps for the convenience of shoppers.
Lin said as more Shenzhen-based restaurant brands are poised to expand in Hong Kong, this should help stabilize the SAR's retail leasing market. 'These new Shenzhen-based food brands will offer more choices for landlords to diversify their tenant mix.'
According to Lin, Shenzhen-based hotpot food chain 'Haidilao' is considering opening its first restaurant in Tsim Sha Tsui or Causeway Bay soon. The food chain currently runs more than 100 restaurants on the mainland, as well as outlets in South Korea and Singapore, and may expand to Taiwan and Japan.
