From Challenges to Opportunities: The Resilience of Hong Kong's Retail Market
Over the last six years, Hong Kong’s commercial real estate market has encountered numerous challenges.
Initially, luxury brands began to reassess their presence in this global city, reducing the number of stores while opening new flagship locations in Mainland China and other major Asian cities. Subsequently, protests and civil unrest in various districts of Hong Kong, including the New Territories, led to instability and a slowdown in the retail economy. The pandemic further accelerated the growth of e-commerce, highlighting the struggles of offline retail. However, nearly four years after the onset of the outbreak, Hong Kong’s commercial real estate market is showing undeniable signs of rebirth.
According to Hollies’ commercial real estate expert in Hong Kong, Mr. G., "The island market for street shops has definitely bounced back in 2024. All the flagships on Queen’s Road Central, for instance, are now leased—a situation that hasn’t occurred in the last decade. This resurgence began with the opening of the internationally renowned gallery Hauser & Wirth in 2021. By late Q3 this year, the Air Jordan Store opened at Pacific House, 20 Queen’s Road Central, ON launched its flagship at the H Queen’s building, and last December, the 19,000 sq ft flagship at Asia Standard Building, previously occupied by TopShop, secured a new long-term tenant in Mango.”
Simultaneously, other top-tier brands have renewed their confidence in Central’s main street, including Breguet, Patek Philippe, Under Armour, Omega, Marks & Spencer, Decathlon, Li Fung, Zara, and COS, etc.
Mr. G. to add: “This dynamism is reflected in the demand for retail space on high streets in Central, such as Wellington Street, On Lan, Gough Street, Lyndhurst Terrace, and Hollywood Street. During COVID, many opportunities arose as brands utilized vacancies for pop-up stores, private sales, short-term exhibitions, or events. Licensing is less common now; the focus is on securing the best available options.”
A unique characteristic of Hong Kong’s commercial real estate market is its dynamism and flexibility. Established brands, as well as newcomers eager to capitalize on local retail opportunities, have negotiated lease terms, including standard lease periods, rent-free periods, negotiated lease fees, and renewal options. When the pandemic struck, landlords quickly adapted by offering legal flexibility through licensing arrangements, providing packaged license fees inclusive of management fees, government rates, and other costs. Both institutional and individual landlords played a crucial role in the resilience of the market.
The diversity of the portfolio and reduced rents have maintained continuous interest from Asian and European brands looking to establish a presence in Hong Kong. Whether fitted out or a blank canvas ready for customization, licensors have facilitated the setup and dismantling of shops by licensees.
In summary, Hong Kong's commercial real estate market has undergone significant transformation while demonstrating remarkable resilience and agility. These qualities have enabled the local market to adapt and thrive amidst adversity. As it continues to recover, the focus on flexibility and innovation will likely attract even more brands, ensuring that Hong Kong remains a pivotal hub for retail in Asia. The current momentum suggests a bright future, characterized by renewed confidence and a dynamic retail landscape.
