Retail demand recovers in Q1 as brands ramp up leasing activity

Retailers took advantage of affordable rents which are only recovering from a protracted decline.

Demand for prime retail locations surged in Q1, according to CBRE Hong Kong’s market view, as local and foreign retailers grew more optimistic of positive business conditions and took advantage of more affordable rents following a rental slump that lasted for 13 consecutive quarters.

Major leasing transactions include a Swiss watch brand leasing 1,200 sq ft in China Building in Central after leasing another prime shopping space in Central Building during the previous quarter.

“We can see retailers start to capitalise on reduced rents to secure prime sites in core areas,” said CBRE Hong Kong senior director for retail advisory and transaction services Lawrence Wan. “Watch and jewellery tenants were particularly active. One example is Chow Tai Fook, which rented a 1,800 sq. ft. ground floor shop in Tsim Sha Tsui and also renewed the lease on its premises in Causeway Bay.”

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Overall high street rents inched up marginally by 0.3% QoQ. Vacancy is poised to fall further with Central remaining crowded as retailers seek flight-to-quality options. The completion of 3.6m sq ft of shopping centre supply, the highest annual total on record, is also projected to offer a broad range for brands eager for retail space.

Following a protracted two year slump, the retail sector is set for further recovery this year as local consumption and visitor arrivals are set to strengthen in the coming months. F&B retailers are expected to remain active whilst pharmaceutical companies and lifestyle products including cosmetics are projected to drive solid leasing demand.

“A new scene for retail and hotel industries is expected later this year with the opening of the Hong Kong-Zhuhai-Macao Bridge as well as the Express Rail Link later this year, which will shorten the travel time among the key cities in the Greater Bay Area and support the formation of a tourism hub,” Wan added.

Experience-oriented retail and entertainment trades like cinemas and children’s edu-tainment are expected to expand rapidly. Pop-up stores and flash retailing are also gaining traction in malls as a way for brands to maximise their exposure and draw footfall.