Hong Kong is tagged the most enticing place for new retail entrants

This is despite retail sector headwinds.

Hong Kong has been identified as the world’s most popular market for new retail entrants in 2015, according to CBRE’s ninth edition of its How Global is the Business of Retail? report.

According to a release from CBRE, Hong Kong attracted 73 new international brands in 2015, up from 58 in 2014, pushing it up four places to take the top spot globally. Singapore follows a close second with 63 new brands, whilst 2014’s top market, Tokyo, slid to third place. Overall global cross-border retailer activity grew modestly in 2015, with the number of new entrants at city level up by 3.1%.

“Despite strong headwinds in the retail sector, Hong Kong still managed to welcome a large number of quality entrants last year. New brands are increasingly targeting tried and tested locations. To gain a ‘stamp of approval’ for their brand, it is essential to have a store in major cities such as Hong Kong,” commented Joe Lin, Executive Director, Advisory and Transaction Services – Retail, CBRE Hong Kong.

“The sharp rental correction in tier 1 streets has created opportunities for mid-range brands to expand. Shopping mall landlords also prefer new players to refresh their tenant mix as part of their asset enhancement or re-positioning initiatives.”

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Hong Kong ranked the seventh most penetrated city by international retailers, with 45.0% of retailers surveyed present there. The city also remains a popular destination for expanding European brands, seeing a 1.1% increase in the presence of European retailers in 2015. 

Retail expansion in Hong Kong has been focused around Food & Beverage (F&B). Of the 73 retailers entering the market last year, 37 are F&B brands, accounting for half (50.6%) of the expansion—with robust activity by Japanese, Korean and Taiwanese brands.

“F&B retailing has become a much more significant factor in the overall shopping experience and landlords are increasingly considering, if not already incorporating, more F&B into their schemes. F&B can be used as a pull factor to draw consumers into shopping destinations or to increase dwell time and is becoming increasingly important in creating shopping destinations,” said Joel Stephen, Senior Director, Advisory & Transactions – Retail, CBRE Asia.

However, the report warned that the challenging environment—including the slowdown in retail sales and tourist spending—has currently propelled some retailers to rationalize their store network. “The retail sector in Hong Kong is still in a downcycle, but the year-on-year decline in retail sales is expected to decelerate in the second half of 2016 given a lower comparison base. Most tenants will remain cautious in expansion and lease negotiations. Meanwhile, landlords are becoming more flexible with rental terms,” Lin concluded.