• Retail space remains depressed

    19 August 2015

    (Hong Kong, 28 July 2015) RICS (Royal Institution of Chartered Surveyors)recently published the Q2 2015 Global Commercial Property Monitor. The Occupier Sentiment Index (OSI) has recovered slightly, rising from -7 to -3 in the second quarter.

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    However, the retail market remains weak as demand for space continues to be sluggish.  The headline rental expectations will remain flat in the coming three months, with the retail sector being expected to post strong declines.

    The Investment Sentiment Index (ISI) recorded a net balance of +1, indicating broadly flat market conditions.  According to the monitor, the new curbs on tourist arrivals from China and a slower Chinese economy suggest that spending by Chinese visitors will not likely pick up anytime soon.   As a result, the retail sector in Hong Kong will remain under pressure.

    RICS Senior Economist Andy Wu, said:Mirroring the survey results from previous quarters, the office and industrial sectors have continued to lead the way with the retail sector lagging significantly behind. Indeed, the retail segment has been the biggest drag on the aggregate sector growth picture. It is notable that the retail space continued to see weak retail sales and a dip in tourist arrivals during the second quarter. As a result, the market for retail space remains in slow motion. Further, our lead indicators do signal that the deterioration in investment potential and weak capital growth expectations will likely continue for a while to come. The retail property market is currently facing a multitude of tough challenges including a decline in Chinese tourist flows into the city and household caution that will continue to weigh on retail spending and expectations for retail property. We believe that without strong support from the tourism sector and a significant rise in consumer confidence, retailers in the local scene will face greater constraints going forward.

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    The Global Commercial Property Monitor data is a good lead indicator of hard data. This has been the case in many key markets in which RICS has been able to explore the relationship between the RICS time series and other sources of data.

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