HONG KONG — Ralph Lauren, Forever 21, Abercrombie & Fitch, Prada, Coach — the list of retailers pulling back from Hong Kong is a long one as the city struggles with 21 straight months of declining sales, but 2017 is ripe for rent deals, according to Japanese brokerage Nomura.
In a report released Friday, it said that a renter’s market will fully emerge this year and that retail companies found at least a 20 percent rental correction when they renegotiated street-front store leases in tourist areas.
While Hong Kong was once home to the world’s most expensive commercial street in the world–Russell Street in Causeway Bay used to command rents that surpassed New York’s Fifth Avenue and London’s Bond Street–high-street shop rentals in Hong Kong have declined since the fourth quarter of 2014, according to the JLL Retail Rental Index.
“Given that leases in Hong Kong are usually for three year terms, we expect the full benefit of rental correction to be visible in 2017,” Nomura said.
At the same time, a handful of large retail developments are set to open this year which could “intensify competition among landlords” Nomura said, naming the Lee Garden Three project in Causeway Bay and over on the Kowloon side in Tsim Sha Tsui, the Ocean Terminal Extension and New World Centre redevelopment.
The retailer most likely to benefit from this is local edgy department store I.T “since over 85 percent of the company’s stores are located in shopping malls locally,” it said.
The latest citywide retail data for November widened the decline to 5.5 percent from the year prior, after several months of improvement.
Nomura said that there were several possibilities for this. First, that there were only four weekends in the month compared to five in October, more discounting during the month for online retailers, and the launch of the iPhone 7 which would’ve grabbed wallet share.
Previously, Hong Kong Retail Management Association Thomson Cheng also reasoned that because of the high spending online for Singles’ Day on November 11 and Christmas in December, customers may choose to spend a bit more modestly in between.