Retail sales are improving

After several consecutive years of falling for rent, the recent retail sales figures have slightly improved. However, the rental of the new transaction still sees a decline. It seems that the adjustment period has not yet completely ended.

In the past three years, retail sales and retail rents have been reported from time to time. Negative news has been heard from time to time. The figures have fallen until the situation was reversed last year. The Census and Statistics Department recently announced that total retail sales in January this year rose by 4.1% year-on-year. The market expects retail sales in February this year to have a single-digit annual increase, even a double-digit increase. The first quarter of this year will also see performance. Better.

In addition, if we look up the figures for the previous year, the total retail sales amounted to RMB 446.1 billion, up 2.2% year-on-year, marking the first time since 2014. The retail sales in Hong Kong for 2014, 2015 and 2016 fell by 0.2%, 3.7% and 8.1% respectively. Digitally, retail sales seem to have bottomed out and stop the decline. As the retail sales figures have improved, it is reasonable for retailers to be more active and active in renting shops. However, in the recent retail core areas, the rents of shops are still adjusting in the three districts of Central, Causeway Bay and Tsim Sha Tsui.

Shop rental stage adjustments

According to the rental figures of DTZ Depot Lease, in 2013, during the peak period of retail rents, in Causeway Bay, the rent for the core area was RMB 3,989. As of 2016, the rent fell below RMB 2,000 and was reported to be RMB 1,799, which fell from the peak period. 55%, and at the end of 2017, the rent for each store in Causeway Bay was reported at around RMB1,739. The year-on-year decrease narrowed to 3.3%. From the data, the decline in the rental of shop premises has narrowed, but does it mean that the rent adjustment has ended or even rebounded?

From the analysis of recent rental cases, the decline in rent has not yet been completed. For example, a Chinese shop in Central China rents out a monthly rent of about 1.3 million yuan. The shop was leased from a watch shop in the early years. The monthly rent was about RMB 2.3 million. It was moved out in 2015. It was later rented by the jewelry store Folli Follie. The monthly rent fell 22% to RMB 1.8 million. Now it is replaced with a new tenant, and the rent drops by 50. Ten thousand yuan to 1.3 million yuan, the rent fell 28%. In addition, the ground floor of Kai Chiu Road, Causeway Bay, was awarded a list of Vacheron Constantin to renew the lease for three years at a monthly rate of 1.3 million, and the lease rate was about 1,000 yuan. The brand’s rent was 2 million yuan, and the new lease fell 35%.

From the above two transactions in this year’s shops, it can be seen that the rental decline has not yet been completed. The decline in the first phase of shop renting has come from 2015 to 2016. As the retail market conditions have obviously weakened, the new peak rental period has fallen by a large margin, about 30 percent. Up to 50%. After two to three years, the number of new rents in the core area still fell compared to 2015 to 2016, reflecting the second stage adjustment of shop rents, which was less than the first stage.

Another phenomenon is the situation of Kyrgyzstan. After several years of absorption, Kyrgyzstan shops such as Tsim Sha Tsui and Causeway Bay are reduced. However, it is not difficult to find that there are still shops that are short-term leases and delivery of Kyrgyzstan. If the recent Lunar New Year, the city of Causeway Bay has already emerged. Several short-term leases were granted to the market. In addition, some individual retailers abandoned their shops in recent days. For example, an art store last year rented 400,000 yuan to the shop in Enping Road. Less than six months after its opening, it has been relocated. In Liyuan Mountain Road in the same district, it has recently abandoned the parking space. There is also a new Kyrgyz shop that poses some pressure on renting.

Changes in consumer spending patterns

The drop in rents for shops is mainly due to two major changes in recent years. The first is the change in consumption patterns of mainland tourists. It is no longer just to come to Hong Kong to sweep brand-name watches and jewellery, but to choose middle-priced goods, or to directly scan goods in Europe. The reason why shop rental was doubled in the early years was because watches and jewelry stores were robbed by 1 to 2 times. After the business fell and abandoned the rent, the shop was pulled back from the peak.

Another factor is that online shopping is beginning to flourish. There is no doubt that Hong Kong’s local area is fine and people’s spending in physical stores is still the mainstream. However, it must not be denied that online shopping has become a trend. Even if it does not replace physical stores, the proportion of people buying online shopping will increase. Always have a certain influence. Affected by changes in consumer spending and online shopping prevailing on both sides, rents in the core area are inevitably weak.