Can Hong Kong's prime retail sector rebound this 2015?

Following a difficult year for the market.

It has been noted that 2014 has been a difficult year for the prime retail market, both for retailers and landlords, with waning Mainland buying interest at the top end and the recent Occupy adversely affecting some prime shopping areas in Causeway Bay and Mong Kok.

According to a research note from Savills, further, In 2015, with a revision of IVS on the cards -- most likely implying more restrictions on the current multipleentry policy -- and a possible decline in Mainland spending in response to anti-corruption measures and slower growth, it expects luxury retail sales to continue to slide.

This would entail both prime street shop rents and prices to decline by another 5% to 10%. Savills also noted that it expects both rental and capital values of shopping centres, especially those non-core centres with a more local focus, to hold up well.

Here's more from Savills:

We are yet to see signifi cant vacant spaces in prime streets coming up, but the pace of expansion of most luxury brands has slowed, if not stalled, in the face of slowing luxury sales.

As such, luxury retail sales declined by 13% in the fi rst 11 months of 2014, with prime street shop rents and prices declining by 6% and 4%, respectively, in 2014.

The good news is local spending is holding up well. With a low unemployment rate (3.3%) and retail spending (mostly local) shifted to other unaffected shopping centres and areas during Occupy, retail sales (non-luxury items) in fact increased by 5% in the fi rst 11 months of 2014.

"2014 has been a year of twists and turns for Hong Kong's property sector, with the robust mass residential price rally surprising the market most. While most commercial sectors held up well, the prime retail sector took a hit." Simon Smith, Savills Research