Retail leasing activity remains steady in Q1 2026

• Retail sales growth accelerated from 6.6% year-on-year in Q4 2025 to 11.8% in January–February 2026, with consumer durable goods recording the strongest increase at 29.7%.
• Mid‑to‑mass F&B operators, especially specialty beverage shops, dominated leasing activity in Q1 2026. Meanwhile, expansion by securities firms continued, with new openings moving away from core areas toward neighbourhood locations.

Prime shopping centre vacancy rose to 12.6%

• Vacancy in prime shopping centres rose from 9.7% in Q4 2025 to 12.6% in Q1 2026, driven mainly by tenant exits from newly completed malls and several underperforming prime centres with weaker locations or outdated tenant mixes.
• High Street shop vacancy recorded a moderate decline to 9.6%, down from 10.0% in Q4 2025. The improvement was driven mainly by falling vacancy in Central and Tsimshatsui, while vacancy levels in Causeway Bay and Mongkok continued to edge up.

Investment volume dropped compared to Q4 2025

• Higher end-user participation was observed in Q1 2026, driven by Chinese restaurant operators, education institutions, elderly care centre providers and food retailers.
• Long-term investors represented over 50% of total investment volume and continued to prioritise retail assets delivering yields in the 6.5%–7.0% range.

Outlook: Retail rents continue to edge lower

• Improving leasing sentiment has led landlords of prime high street shops and leading malls to hold firmer on rents. However, affordability pressures on mid-market retailers and experiential operators continue to limit rental growth.
• Although retail sales appear to be entering an early phase of stabilisation, inflation risks linked to fluctuating oil prices may weigh on consumer sentiment and introduce additional uncertainty to retail recovery.