(15 March 2024, Hong Kong) The retail market in Hong Kong is steadily recovering, showing positive signs of progress despite the ongoing challenges. Total retail sales have rebounded, indicating a gradual recovery in consumer spending.
However, the overall number of inbound visitors remains lower than desired, according to Savills in its Market in Minutes – Hong Kong Retail Leasing report of February 2024.
Local Retail Market Recovery in Progress
The retail and tourism market in Hong Kong is steadily recovering, showing positive signs of progress despite the ongoing challenges. Total retail sales have rebounded to approximately 82% of the 2018 level, indicating a gradual recovery in consumer spending. However, the overall number of inbound visitors remains lower than desired, standing at only around 52% of the 2018 figures.
Key areas such as prime street shops and shopping centres in Central and Causeway Bay are witnessing business consolidation, with retailers still looking for signs of recovery. On the other hand, prime street shops in Tsim Sha Tsui and Mong Kok, which primarily cater to tourist spending, have faced difficulties due to the changing preferences of Mainland visitors towards more in-depth travel experiences.
Slow Recovery of Hong Kong’s Retail Market amidst Border Reopening Success in Neighbouring Regions
Nevertheless, there have been positive developments in nearby regions, benefited from border reopening. Hainan’s duty-free sales reached an impressive RMB 43.7 billion in 2023, while Macau recorded a robust overnight visitor spending of HK$ 31.5 billion in the first half of 2023, excluding the gaming sector.
One significant factor hindering the market’s progress is the outbound travel of Hong Kong residents to neighbouring Shenzhen. The easy accessibility, economical dining options, and unique entertainment experiences in Shenzhen have drawn residents away from Hong Kong, impacting the local retail sector.
Individual Visit Scheme Opens Up to New Regions
A positive step in this direction is the recent addition of Xian and Qingdao to the Individual Visit Scheme, effective from March 6, 2024. This expansion aims to diversify the range of Mainland visitors to Hong Kong and accelerate the recovery of the retail market. Airlines and MTR are already exploring opportunities to increase their capacity to accommodate the expected influx of visitors from Xian and Qingdao.
Hong Kong’s Unique Shopping Centres Redefining the Retail Landscape
In addition to addressing immediate challenges, Hong Kong is differentiating itself in the retail landscape by developing unique and innovative shopping centres. These centres offer distinctive experiences, attracting both local residents and visitors from the Greater Bay Area and wider Asia region. Examples include Groundswell, a 10,000-square-foot indoor surf house located at Airside, which has garnered attention, particularly among young adults, for its one-of-a-kind sports experience. Simultaneously, the mega entertainment hub, 11 Skies, is positioning itself as a future world-class destination for entertainment, further enhancing Hong Kong’s appeal to visitors.
Mr. Jack Tong, Director, Research & Consultancy of Savills commented, “Landlords’ grief over a long-lost market peak has finally shifted from the denial stage to an acceptance of the ‘new normal’, leading to an uptick in transaction volume and a stabilization in rents.”
Mr. Barrie Chan, Senior Director, Retail of Savills said, “Recently, Hong Kong witnessed a significant milestone during the Lunar New Year Golden Week, with 1.44 million total visitor arrivals. This figure is comparable to the visitor numbers seen in 2018, signifying a return to pre-pandemic levels. Landlords and the government are working together to enhance Hong Kong’s attractiveness to Mainland and international visitors, stimulating both the retail and tourism sectors in response to changing consumer trends and market challenges.”