Leasing momentum moderates slightly in Q4 2025 compared with the strong pace seen in Q3 2025, while remaining robust

• Total retail sales growth accelerated, rising 6.7% y-o-y in October–November, up from the 3.9% increase recorded in Q3 2025. Coinciding with the launch of the iPhone 17 in September, electronic goods sales surged 30.2%.
• In Q4 2025, the banks and securities sector expanded notably, supported by the active stock market and a robust wealth management industry.

Prime shopping centre vacancy declines slightly from 9.9% in Q3 2025 to 9.7% in Q4 2025

• This improvement was underpinned by increased rental concessions and seasonal factors ahead of the holidays, with retailers leveraging Christmas décor and events to drive footfall, in line with the growing salience of “instagrammable” experiential retail.
• In contrast, High Street shop vacancies rose from 9.7% to 10.0%, with performance diverging across core districts. Vacancy in Central and Causeway Bay improved, while Tsimshatsui and Mongkok continued to see rising vacancy.

Investment sentiment slightly moderates in Q4 2025

• Most of the notable sales stemmed from McDonald’s disposal of owner-occupied assets, following its July announcement to divest its Hong Kong retail properties.
• As of mid‑December, five out of eight McDonald’s listed properties were sold to different local investors, with initial yields ranging from 4.8%–7.3%.

Outlook: High yield to remain a key criterion for investors

• In 2026, High Street shop rents are projected to soften by 0–5%, while prime shopping centre rents are forecast to decline further by 5–10%, driven by modest retail sales growth and a challenging employment outlook.
• Investors are expected to focus on assets offering yields of 6–7% to help offset negative rental reversions amid ongoing rental declines.