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Shopping for Space

Prime retail space will be the subject of increasingly competitive bidding with the strengthening economy and buoyant consumer confidence in Hong Kong, according to the latest Jones Lang LaSalle Hong Kong Economic Insight.

A range of economic indicators is pointing to a strengthening economy in Hong Kong: GDP grew by 6.8 percent year-on-year in the first quarter of 2004 and 9.5 percent in the first half; private consumption grew by 5 percent, investment 5.8 percent and total exports by 13 percent; unemployment rate dropped to 6.9 percent in June, the lowest in 28 months.

The latest survey by MasterCard International also suggests sustained consumer confidence for the second half of 2004. The findings are underpinned by retail sales surging by 11.5 percent by volume and 13.2 percent by value in the first five months of the year as the economy recovered from a dismal SARS-affected 2003.

Rents and prices of high street retail properties each rose by 3 percent in the second quarter. Rents of high street shops have grown by 39.3 percent since July 2003, when the retail market recovered from the SARS epidemic; prices have grown at an even higher rate of 73.6 percent since then.

Pedestrianisation and beautification schemes in several prime retail locations have improved the shopping environment, and drawn an even higher pedestrian flow. More comprehensive schemes have now been proposed in Causeway Bay, which will further enhance the attractiveness of the district, and will drive competition for space from retailers.

"The strengthening economy and consumer confidence have pushed up demand for prime retail premises, especially those strategically located," says Dr Nelson Wong, Head of Research for Greater China at Jones Lang LaSalle, "While there will be short-term disruption, the extensive beautification schemes proposed in Causeway Bay will give another thrust to the area in the long term.  We expect retailers with the ability to afford higher rents, such as international designer labels and jewellery/watches to be the dominant tenant type."