Retail vacancy rates within Hong Kong’s commercial properties are starting to moderate, say industry consultants, as changing spending patterns of locals and tourists are seeing new tenants within the rental market.

According to the executive director and head of retail services in Hong Kong at Cushman & Wakefield, Kevin Lam, as online shopping continues to rise, shoppers visiting physical stores concentrate more on the experience and services offered. 

“Some retail and lifestyle stores chose to expand their [bricks and mortar] locations in Hong Kong,” Lam said. 

Hong Kong’s retail vacancy rate is forecast to hold steady in Q4, with rentals increasing by 5-10%, as per Cushman & Wakefield forecasts.  

The wider property market currently remains in limbo, Lam added, taking into account the sluggish economic recovery and elevated borrowing costs, South China Morning Post reports. 

Furthermore, leasing volume for High Street shops declined by 14.4% to 368,000 square feet in Q3 compared to the previous quarter, CBRE reports. The most active businesses were restaurants, pharmacies and cosmetic stores according to the report, contributing 41% of the transacted volume.

Hong Kong’s retail industry has improved in 2023, as businesses made the most of the border reopening at the beginning of the year. 

Total sales in Hong Kong in August rose 19% year-on-year to HK$270.5 billion (US$34.6 billion), as per the statistics department. 

In addition, an improvement in sentiment and demand helped to increase rents for high street shop space by 2.4% between July and September, surpassing the 1.2% and 1.9% growth in Q1 and Q2, CBRE stated. However, they remained around 72% under the peak rates seen in 2014, says industry data.