After nearly three years, Hong Kong and the Mainland passed the first phase of quarantine-free customs clearance on January 8, and the Mainland has recently resumed processing visas for individual travel to Hong Kong. However, the flow of people on Canton Road in Tsim Sha Tsui is not as high as before the epidemic.
When will "Free Travel" return?
CBRE (CBRE) Hong Kong Advisory and Transaction Services - Senior Director and Head of Retail Department Wen Yunqiang accepted an interview with "Hong Kong 01" and believed that the retail industry in Hong Kong is difficult to return to the old free travel situation, and the vacancy rate of street shops in traditional busy areas may continue until 2024 , There are three major reasons that cause "there are shops but no renters".
Wen Yunqiang predicts that the vacancy rate of street shops in traditional bustling downtown areas may continue until 2024.
(Photo by Huang Baoying)
In the past three years, affected by factors such as the epidemic and the Fed's interest rate hikes, Hong Kong's economy has continued to weaken, and the vacancy rate of shops has been high. Commercial real estate consulting firm CB Richard Ellis pointed out that the vacancy rates of the four major commercial districts in the last quarter, Central, Causeway Bay, Mong Kok, and Tsim Sha Tsui, were respectively 8%, 14.5%, 17.1% and 20.3%.
Wen Yunqiang said that the continuous epidemic control for many years has made the market of street shops in Tsim Sha Tsui, Mong Kok and Causeway Bay very severe, and the "sky-high price" street shops are no longer there!
For example, Russell Street in Causeway Bay, which used to be the most expensive street in the world, had an average monthly rent of about 1,500 yuan per square foot before the epidemic, but the current rent has dropped by 45% to about 825 yuan; another example is the Asia-Pacific "Main Street" report published by Cushman & Wakefield. In 2022, the annual average monthly rent of shops in Tsim Sha Tsui is 933 yuan per square foot, a 41% drop in rent compared to before the epidemic.
People from all walks of life hope that Hong Kong's customs clearance with the rest of the world and the mainland will boost the retail and tourism industries and make the market prosperous again.
The situation can be similar to that in 2003, when the SARS epidemic hit Hong Kong's economy hard, and the implementation of free travel brought prosperity to Hong Kong's retail industry for many years.
Today, can Freedom Travel once again shoulder the heavy responsibility of saving Hong Kong?
Wen Yunqiang believes that it is difficult for the retail industry in Hong Kong to return to the old independent travel situation.
(Photo by Lu Yiming)
The "deformity" phenomenon in the market is expected to be rewritten, and the fine shop breaks out
Wen Yunqiang believes that although the current situation of independent travel is similar to that of the past, it is more convenient for mainlanders to go overseas, and the mainland has also expanded the amount of tax-free shopping in the Hainan Island duty-free zone. Gao Feng, "I have been traveling independently for nearly 20 years, and many mainlanders have been to Hong Kong."
According to data from the Hong Kong Tourism Board, the number of tourists visiting Hong Kong in 2018 exceeded 65 million, with a total consumption of 2,764.4 billion yuan, and nearly 80% of the tourists came from the Mainland.
The figures are exaggerated, but he lamented that Hong Kong’s retail industry developed rapidly due to independent travel in the past, and there was a “distortion” phenomenon. There are 4 in Central, but only 2 in Paris, or you will see more gold shops than 7-11 in the street.”
Wen Yunqiang described the current reshuffling, and many local brands have emerged, such as COCO, Hello Milk Tea, Patisserie Tony Wong, etc. continue to open stores, but the floor space is smaller than before. "Some retailers think that there is no need for such large stores For publicity, you can choose KOL (Internet celebrities) to sell advertisements; some Omakase (run by chefs) restaurants have high per capita consumption and would rather have fewer tables; I like "style", why don't I take girls to the hotel (eating) every time?"
Wen Yunqiang described the current situation as a reshuffle, with many local brands emerging.
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Rent is no longer the most concerned point of enterprises
Despite the support of local brands, the phenomenon of "Ji Pu" in Tsim Sha Tsui and Mong Kok has not improved. Wen Yunqiang said that 30% of the retail business in Hong Kong depends on tourist consumption, and the remaining 70% depends on local consumption. The current rent has been reduced by 40%. Reflecting the negative factors of the loss of tourists caused by the epidemic, it even dropped by 10%.
Around November last year, Hong Kong and the international part of the customs clearance, overseas companies have come to Hong Kong to inspect the shop, but the rent is no longer the most concerned. !"
At the same time, Wen Yunqiang pointed out that the epidemic has changed the consumption patterns of the public, and online sales are prevalent. "Large companies have the financial resources to develop online shopping platforms, so they don't need to rely on brick-and-mortar stores." Although rents have been reduced, most companies will "evolve" instead of opening. "They will not increase the number of shops, but will change the location of the shops, because there are more and better shops to choose from."
Despite the support of local brands, the phenomenon of "ten rooms and nine empty spaces" in Tsim Sha Tsui and Mong Kok has not improved.
(Photo by Gao Zhongming)
Shopping malls can guarantee the quality of adjacent shops
Big brands have successively reduced their stores, but Wen Yunqiang pointed out that luxury brands always need physical stores, but they have moved to shopping malls. Although the rent of shopping malls is only 10% lower than before the epidemic, the average monthly rent is 500 to 600 yuan per square foot. Rents for street shops are not much different, but the advantage is that they can guarantee the quality of nearby shops. "For example, the fashion brand LV has great appeal, so renting street shops is no problem at all, but the most surprising thing is that street shops rented from fishball shops and mask shops Therefore, opening a department store can ensure that the surrounding areas are at the same level (level), and at the same time, the department store offers discounts from time to time to help attract people.”
In the new year, there will be large-scale shopping malls in various districts in Hong Kong, such as 11 SKIES in Chek Lap Kok, The Wai in Wai Fong, THE SOUTHSIDE in Wong Chuk Hang, etc. I believe they will attract many tenants.
However, Wen Yunqiang pointed out, "(It is not ruled out) that some brands will prefer street shops, as they have more autonomy and can control the opening time by themselves. Gold shops also prefer to open street shops, and do not allow shopping malls to take a cut."
Wen Yunqiang pointed out that shopping malls can maintain the quality of nearby shops.
(Photo by Deng Yinglin)
The vacancy rate in Liaowang District will continue until 2024
At present, customs clearance between Hong Kong and the rest of the world and the mainland has been successively cleared. Wen Yunqiang said that the leasing market has not seen a rebound for the time being. As the customs clearance speed is faster than expected and the owner’s attitude is aggressive, it is expected that street shop rents will increase by 5% to 10% this year. On the contrary, tenants remain cautious Optimistic, "The merchants always have reservations. What is the demand of the first batch of tourists? It may be mainly for family visits and business contacts, and consumption power may not recover immediately."
Regarding the future street shop leasing market, Wen Yunqiang predicts that it will still depend on the external economy, and the vacancy rate in busy areas will not change much until 2024.
However, he remains optimistic, saying that the vacancy rate will not rise again, and some companies have returned to the Hong Kong market. The clothing brand Esprit will restructure in response to the epidemic in 2020. It once closed 56 retail stores including those in Hong Kong and Singapore, and withdrew from Asia. However, it will gradually return to Hong Kong in 2022.
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