The Vacancy Rate Of Retail Property In Hong Kong Has Risen To The Highest Level In Four Years

CBRE, an international real estate consultancy, said more retail real estate properties would be idle in the second half of this year as many of the world's major fashion and luxury brand stores may withdraw from Hong Kong, China.

CBRE said that in the first half of this year, the overall vacancy rate of grade a commercial streets in Hong Kong rose to 13.5%, reaching the highest level in recent four years. The rents of commercial streets declined by 15.2%, and it is expected that rents will fall by 5% - 10% in the second half of this year.

According to the data recently released by the Hong Kong SAR government, retail sales in Hong Kong fell by 32.8% in May, the 16th consecutive month.

Uncertainty leads to weak rental demand

CBRE pointed out in its recent Hong Kong real estate market outlook 2020 report that office tenants will remain cautious in 2020 in the face of strong economic resistance. However, if the outbreak is brought under control by the middle of the year, the recovery of rental demand in the second half of 2020 may accelerate.

The rising vacancy rate and weak market atmosphere will further lower the rents of Grade A office buildings in 2020. The uncertainty of market development has further led to the withdrawal of major fashion luxury brands from Hong Kong

British beauty retailer rush to close its five storey flagship store in Hong Kong (link)

Greek jewelry brand Folli follie closed all its stores in Hong Kong and laid off all 60 employees in Hong Kong (link)

Victoria's secret, an American underwear manufacturer, closed its flagship store in Hong Kong just two years ago (link)

British high street brand Topshop will close its last store in the city of Hong Kong

Gap, an American fashion brand, said it would close five of its eight stores in Hong Kong from late July

Lawrence Wan, senior director of CBRE's Hong Kong Advisory and trading services, said Hong Kong remained an important strategic market for large international groups In the future, when the rent is lowered and tourists return to the market, the brand may return to Hong Kong for development.

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The above figure shows the forecast of CBRE's regional market rent in Hong Kong SAR

Japanese catering and other new business expansion

Affected by social unrest, the total income of Hong Kong's catering industry showed negative growth for the first time in nearly a decade in 2019, with a year-on-year decrease of 11.8% in the third quarter and 14.3% in the fourth quarter. Similar to chain fashion brands, some international catering chains have begun to close their branches in Hong Kong in the second half of 2019.

Despite this, retailers and restaurant brands from Japan are still active in Hong Kong, with more than 20 Japanese brands choosing to appear in Hong Kong recently.

Wan added that the closure of some international brands was more mainly due to external economic factors. On the other hand, falling rents have also attracted some new businesses to expand in Hong Kong. Food and beverage companies have become more active in the retail sector. Japanese catering brands don don don donki and sushiro are examples of new arrivals in Hong Kong last year.