Leasing activities slightly moderates in Q2 2026, compared with Q1 2026

• Retail sales grew by 7.9% y-o-y in May, further easing from the pace recorded in April. Sales of jewellery, watches and clocks, and valuable gifts remained resilient, while growth in electrical goods and motor vehicles and parts moderated.
• New-to-market brands are increasingly entering prime retail districts, displacing some long-established operators. Leveraging softer rents, they are securing core locations to enter Hong Kong and boost brand visibility.

Vacancy recovery remains uneven

• Prime shopping centre vacancy edged up slightly, from 13.6% in Q1 2026 to 13.7% in Q2 2026.
• High street shop vacancy trends remained mixed across the four core districts. Vacancy in Tsimshatsui and Mongkok saw improvements, while Central and Causeway Bay’s vacancy rate increased.

Transaction counts hold steady in Q2 2026

• End-user participation eased slightly during the quarter, with demand mainly supported by buyers from the education and religious sectors.
• Supported by a buoyant residential market, retail transactions increased, driven by redevelopment demand. Notable buyers included the Urban Renewal Authority, Henderson Land and New World Development.

Outlook: Rental decline to further moderate in H2 2026

• A more balanced mix of high-end and mid‑to‑mass tenants across Prime shopping centres and High Street shops is expected to support vacancy stabilisation or gradual improvement, while easing downward pressure on rents.
• Despite dual pressures from online sales and Northbound travel, local consumption remained resilient between late 2025 and early 2026, suggesting a near-term normalisation of these structural shifts and associated leakage from the domestic retail market.