Hong Kong high street shop rents to rise by up to 15% this year

Overall prime retail rents could grow at a slower pace of 5%.

Alongside a more visible pick-up in inbound arrivals to Hong Kong, JLL said retail sales will likely be driven by the increase in tourism expenditure, which is conducive to rental growth. 

In a report, JLL said rentals of High Street shops are forecasted to rise 10%-15% this year, while that of Overall Prime will likely grow more slowly, up by only 0%-5%, as mall owners continue to manage tenancies and occupancies with caution.

Here’s more from JLL:

With interest rate hikes still in place, capital values are expected to grow relatively more slowly than rental values. Investment confidence is expected to hinge upon a sustained recovery in the economy. The yield of High Street shops is envisaged to expand at a faster pace, while those of Overall and Premium Prime shopping centres remain flat.

Vacancy sees mild improvement

Vacancy pressure relaxed slightly in High Street due to increased shopping traffic spurred by the re-opening, but still hovered at a double-digit level of 15.6%. Meanwhile, no new retail supply was completed during the quarter and the overall Prime Centres vacancy rate dropped to 6.3% from 6.6% a quarter ago.

The commercial development site (Lot KIL 11273) at the junction of Sai Yee Street and Argyle Street in Mongkok, providing over 1.5 million sq ft of space, was awarded to Sun Hung Kai Properties for HKD 4.7 billion or an A.V. of HKD 3,103 per sq ft (including government, institution and community (GIC) facilities, GFA).

Investment interest shows signs of returning to core areas

Retail rental values have rebounded in 1Q23. Rental values for High Street rose by 1.5% q-o-q, while that for Overall Prime shopping centres remained relatively stable, edging up by 0.3%, as landlords focused on improving occupancy and fine-tuning the trade mix of their portfolios.

Total investment volume surged by 43.8% q-o-q in 1Q23 to HKD 70.3 billion (transactions over HKD 20 million). A number of transactions were registered in core districts. Notably, a ground-to-fourth-floor shop (18,234 sq ft) in Mongkok Commercial Centre at Argyle Street was sold for HKD 350 million at an estimated initial yield of 3.1%.

Note: Hong Kong Retail refers to Hong Kong's overall prime shopping centre and high street retail markets.