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Sustained demand and low-vacancy environment fuels rental growth
HONG KONG, 7 June 2012 – Retail demand is expected to extend its uptrend in 2Q12, driven by low vacancy rate and strong demand from both local and international retailers.
Particularly, the retail demand is largely driven by the new-to-market brands. In the past 24 months, over 11% of all deals transacted over HKD 500,000 per month were contributed by the new market brands (which only counts the brand once, not every store), which show their willingness to compete and secure prime store locations in Hong Kong.
Limited vacancy on high streets resulted in demand spilling over into what has traditionally been considered secondary streets, thus pushing rentals of street shops higher. This trend saw an expanding effect to prime districts of Causeway Bay, Central and Tsimshatsui with the neighbouring streets close to Russell Street in Causeway Bay, Queens Road, Central and Canton Road in Tsimshatsui, benefiting from the increasing rentals and strong demand.
Total retail sales value continued to post robust growth throughout 1Q12, growing by 15.9% y-o-y, after rising by 24.9% in 2011 to approximately HKD 406 billion. The strong growth in retail sales was also sustained by the continuing growth of visitor arrivals, which rose by 15.6% y-o-y to 11.2 million in 1Q12.
Activities in the investment market picked-up noticeably in 1Q12, with investors targeting street shop properties. The pick-up in investment activity and return of speculators saw the capital value of high street shops surge by 9.7% q-o-q in 1Q12 after remaining broadly stable in 4Q11.
Although the emerging signs of weakness in the labour market and the slower growth in visitor arrivals may lead to a slower pace of rental growth in the longer term, growing demand from international retailers as well as low level of vacancy are expected to continue to push rentals up in the remaining portion of 2012, remarks Tom Gaffney, Head of Retail at Jones Lang LaSalle Hong Kong.
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