As a culinary city, the F&B sector in Hong Kong is both super competitive and cut-throat. Players not only have to continuously find ways to remain relevant amongst a fickle consumer base but also navigate a rental market that can be quite volatile.

With the broader retail sector in the midst of a three-year long slump, the leasing market has become much more accommodative towards F&B operators. Street shops have become more affordable, while the chances of getting into a shopping centre are now much higher as landlords seek to increase their F&B offering. Against this backdrop, here are some emerging F&B trends that are worth watching out for in 2018.

More international light refreshment operators venturing into the Hong Kong market

Last year, F&B operators accounted for 66 per cent of all international newcomers, compared to only 51 per cent  in 2016.  About 40 per cent were from Japan, over half of which chose to open their first location in shopping centres. Many of these operators established small outlets serving light refreshments catering to the long working hours and stressful lifestyles of Hong Kong’s hardworking locals.

Bringing food lane format indoors

In an attempt to replicate the ambience of the local street food scene, a number of shopping centres have begun to incorporate ‘indoor street’ settings lined with light refreshment outlets. Unlike typical foodcourts, these layouts rarely provide seating. Food Point in East Point City and Food Lane in TKO Gateway, both located in Tseung Kwan O, are among early pioneers of these ‘indoor street’ settings.

From a real estate perspective, this format is a win-win for both operators and landlords. Smaller stores provide a lower entry point for operators while allowing landlords to provide a greater variety of F&B offerings. This not only enhances the appeal of centres but also opens the possibility of charging higher rentals, on a unit rate basis.

Dining experience going beyond food and beverages

With food increasingly considered as a means for social and cultural exchange, it has been an on-going trend for general retailers to partner with F&B operators to create more experiential retailing experiences. This ‘crossover’ trend is now moving beyond the retailer/restauranteur model to incorporate more entertainment.

These new ‘crossover’ trends have been introduced to more mainstream shopping centres. Crazy Car Café at D2 Place Two in Lai Chi Kok and Speedway Diner at KPC in Kowloon City are recent examples. Both outlets cover an area of over 10,000 sq ft and combine traditional dining with karting entertainment based around fun.

Expanding catchment population in non-core retailing areas to welcome new retail projects

The coming three years should see about five million sq ft of new retail floor space — including projects with GFA greater than 100,000 sq ft — being delivered to the market.  Many of these new projects will be located in non-core retailing areas, such as Tseung Kwan O and Tsuen Wan; in many instances forming part of larger residential developments.

We expect these areas to be amongst the fastest growing markets to watch out for, driven by rapidly growing consumption alongside a growing residential community.

We’ve collaborated with the International Council of Shopping Centers (ICSC) to publish a white paper on the impact of foodservice growth and its impact on real estate. Download “Food & Beverage within Retail Real Estate“ to read about the considerations and best practices for the successful integration of foodservice, and the outlook for the future.

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