Street shop rents hurt most by retail downturn

Landlords face tougher battles.

Savills’ own indices reveal that street shop rents have been most affected by the downturn in Hong Kong's retail market.

According to a research note from Savills, this is as landlords face stiffer competition in a less transparent environment than exists among shopping malls.

Street shop rents are hugely variable depending on location and tenant type so generalisations are hard to make, but there are examples of asking rents reduced by as much as 20% to 30% while some renewal rents are down by 15% to 20%.

Here's more from Savills:

Savills' average prime street shop rental index showed a fall of 5.5% quarter-on-quarter in the second quarter of this year, a decline of 19.5% year-on-year. Savills also notes that there is now more vacant stock and examples of surrender cases on first-tier streets and in secondary locations.

Shopping mall rents, however, continue to resist the general trend and remained generally steady in the second quarter, rising by 0.2% quarter-on-quarter and 3.5% year-on-year.

While mall owners continue to innovate to stay ahead, more marked changes have taken place on the high street where the emphasis is shifting away from watches and jewellery and luxury fashions and towards more mass to mid-market brands with lower rental affordability.

In this respect, major rental adjustments have been noted in both Central and Causeway Bay. In some rare positive news, we note that strong domestic consumption means that F & B remains relatively more resilient than other trades and suburban malls continue to be well supported by local consumers.