Hong Kong shopping centre rents predicted to rise

Hong Kong retail rents are expected to inch up in 2018 according to projections by Savills.

In a media briefing on Tuesday, Savills senior director of research and consultancy, Simon Smith, predicted a rise in prime retail shop rents of up to 3 per cent, following a decline of 2 per cent this year.

“The domestic economy is supporting demand as unemployment is low and consumer confidence is high as incomes grow and house prices hit new records,” Smith said.

“Retail sales are beginning to show signs of life while mainland demand is also returning after two to three years of downward adjustment.”

At the end of last year, Smith forecast a prime street retail rent decline of between 5 per cent and 10 per cent, but despite some high-profile rent renegotiations, they held up.

Smith’s data is based on ‘spot’ rents which are different to the headline-grabbing rent reductions achieved by some retail groups in Central and Causeway Bay during this year.

“When you read about a 50 per cent rent cut, that is usually the renewal of a three-year lease. My rents are ‘spot’ rents and the 2 per cent is this year alone.”

However, Smith expects shopping mall rents to slip over the next year, giving the narrowing gap with strip-shops. After a decline of just 1 per cent this year, he is tipping a fall of up to 5 per cent next year.

In terms of sales of retail real estate, Smith predicts an increase in prices of up to 5 per cent next year following a decline of 4 per cent this year, which was well below the 5 to 10 per cent he expected in late 2016.