Larger retailers finally finding room for growth in Hong KongJuly 11, 2019 / By
While shopping for camping gear with my family last weekend, we stumbled upon the new Decathlon store at Sheung Tak Plaza in Tseung Kwan O. This particular shop spans over 72,000 sq ft—including a 36,000 sq ft outdoor playground—and provides shoppers with plenty of room to test out goods before hitting the checkout line.
The overall size of the store is somewhat of an anomaly, as outside of supermarkets and department stores, few retailers have committed to opening new stores of this scale in Hong Kong over the past several years. Yet, Decathlon is not alone in opening larger stores; through the first half of 2019, we’ve seen a general uptick in leasing commitments for stores over 10,000 sq ft.
Take Japanese discount retailer, Don Quijote, as an example. After leasing 30,000 sq ft for its supermarket flagship (under the brand ‘Don Don Donki’) in Tsimshatsui, the retailer quickly committed to anchor the yet-to-open OP Mall in Tsuen Wan, taking 50,000 sq ft at a reported monthly rent of HKD 1.5 million. Meanwhile, everybody’s favourite brick toy, LEGO, leased over 20,000 sq ft at K11 MUSEA in Tsimshatsui for the opening of its new LEGOLAND Discovery Centre. K11 MUSEA is a new 10-storey ‘museum-retail’ complex opening this fall.
One of the reasons why Hong Kong has seen fewer large store openings in recent years is due to the limited opportunities available in the market for retailers. Occupancy rates in the city’s prime shopping centres have hovered above 95% for most of the past decade. However, with the retail sector continuing to struggle, landlords are increasingly open to accommodating different concepts and anchor tenants as a point of differentiation. That’s why when we take a closer look at the location of all the larger stores committed by retailers over the past six months, we can see that most are located in areas with a higher concentration of new retail supply (Figure 1).
Figure 1: Retail supply and the location of large-space operators
Source: market sources, JLL
Moreover, retailers have been comfortable in opening new stores in areas beyond the city’s traditional retailing areas, especially areas with fast-growing resident populations, such as Tseung Kwan O.
Looking ahead, another 5.1 million sq ft of new prime shopping centre space is expected to come online over the coming five years, all of which will be located in non-core retailing areas (Figure 2). For larger-store retailers who are looking for expansion, new opportunities await.
Figure 2: Prime Shopping Centres supply and vacancy rate (2006 -2023)
Source: Buildings Department, market sources, JLL
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