Worldwide, Cushman reports that most prime central business districts remain vibrant, with the top 250 retailers reporting an average 8.5 per cent growth in business in 2022.
But the story for Hong Kong is perilously mixed: Tsim Sha Tsui and Causeway Bay retail rental costs remain the highest in Asia. There are questions over whether such stratospheric rental levels reflect vibrancy or can be sustained.
While Hong Kong still demands the highest retail rentals in Asia by a large margin – 50 per cent higher than Ginza or Omotesando in Tokyo and three times the rentals along Shanghai’s West Nanjing Road – the reality is that rents have fallen by almost 40 per cent since 2019.
Hong Kong gives out consumption vouchers. Stores raise prices. Coincidence?
Hong Kong gives out consumption vouchers. Stores raise prices. Coincidence?
Balancing all these factors, property consultancy JLL predicts that “Hong Kong’s retail rents are unlikely to return to their historical market peaks in the coming five years”.
My sense is that even this forecast might be optimistic. Before the pandemic, who would have forecast the surge in shop theft, which according to the US National Retail Federation jumped 20 per cent last year? Not only has this directly weighed on retailer profits, but it has led to an extra 28 per cent outlay on enhanced security.
So whatever Cushman says about the continuing vibrancy of central business and retail districts around the world, I suspect the state of consumer retail is more perilous than most are willing to acknowledge. Cushman themselves point to a “K-shaped” recovery, with luxury retail and value retail continuing to grow but discretionary retail shops under persistent downward pressure.
If Hong Kong is going to continue to thrive, this must mean a significant restructuring of the economy with less reliance on tourists and their retail spending interests. After four marvellous decades, our property moguls could face protracted turbulence ahead.
David Dodwell is CEO of the trade policy and international relations consultancy Strategic Access, focused on developments and challenges facing the Asia-Pacific over the past four decades