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Many Hong Kong retailers plan to open more stores next year, a new JLL survey shows.
The realty consultancy firm found that 62 per cent of overseas and local retailers in its survey plan new stores despite predicting a recovery in retail rents in core shopping precincts like Causeway Bay, Central and Tsim Sha Tsui.
Rates have plummeted more than 40 per cent from the market peak in 2014, says the survey, but half of the 50 retailers surveyed last month believe Hong Kong’s retail market will bottom out and recover next year.
While all respondents believe high-street rentals are overvalued, there is an equal balance between retailers who prefer to open a store in a shopping mall and those who favour a street-level outlet.
“Hong Kong’s retail market is still challenging, but the mood among retailers has changed from pessimistic last year to believing the worst is over and there are now opportunities,” says JLL Asia Pacific director James Assersohn.
He says the city’s prominence in the global map of retail and luxury goods has not been diminished amid a strong domestic consumer market and its exposure to the Mainland Chinese market.
Statistics from the Hong Kong Tourism Board offer more reasons for optimism: total tourist arrivals in the first five months this year rebounded 3.2 per cent year-on-year to 23.6 million. Moreover, visits by overnight tourists, who spend double on shopping than same-day tourists, rose 5.7 per cent to 11 million.
“Tourist numbers are bouncing back. Hong Kong’s rentals have come down and still need a small amount of correction to create an equilibrium. However, business is booming for many retailers and the reduced rentals have left a great opportunity to obtain prime retail space,” says Assersohn.
“Retailers are seeing this as a great time to take advantage of the market conditions and acquire more space.”
Meanwhile, Hong Kong is lagging in online shopping. Of the surveyed retailers, 22 per cent believe consumers still prefer brick-and-mortar shops, though almost all key retailers and chains have been running online platforms for sales and promotion for years.
“Hongkongers believe it’s still more convenient and more enjoyable to just pop into a mall,” Assersohn said.
Malls are transforming into community hubs by offering more entertainment and improving dining options, he says.
JLL Hong Kong head of retail Terence Chan says landlords are now willing to offer flexible leasing terms to the retailers with a good brand image.
Also, the rental correction allows more retailers to enter the market and for landlords to diversify their tenant mix. “It has also helped many retailers to open crossover stores to create a new shopping experience.”