Daily use and affordable F&B show resilience in leasing demand

• From January to August, the total retail sales of consumer goods only grew by 1.1% y-o-y. As sales performance failed to meet expectations, leasing demand remained tepid in general.
• Daily consumption businesses targeted at Hong Kong consumers and local families showed resilience in market activity during the summer vacation. Affordable F&B, mass market clothes and household retailers made up around 60% of the new leases by count.

Four suburban projects open with high occupancy

• In Q3 2024, four community retail projects opened in the Suburbs with low vacancy rates. These new projects were mid- to low-end positioned, providing mundane consumption offerings to the large surrounding neighbourhoods.
• In addition, effective vacancy filling in some existing Urban projects was recorded. The citywide vacancy dropped from 2.9% to 2.3%.

Rent declines persist in most projects

• Considering the insufficient leasing demand, most landlords had to lower rents to attract new tenants. Citywide rents fell by 1.3% q-o-q on a chainlinked basis.
• Some projects with unique standings, for example, enjoyed popularity among Hong Kong consumers and took the leading market position in the city’s outskirts, holding rents steady.

Outlook: Policy measures to strengthen market confidence

• During late September and early October, the government introduced various policies, including a suite of monetary actions. These are expected to contribute to a more optimistic consumption outlook and enhance confidence among retailers.
• We expect seven new projects, with around 0.93 million sqm in total, to enter the market in the next 12 months. Abundant future supply is poised to escalate competition in the retail market, likely pushing the average vacancy rate upward.