Retail Research

November 2011

Hong Kong Retail

INSIGHT AND COMMENTARY ON THE WORLD’S MOST DYNAMIC RETAIL MARKET

November 2011 Hong Kong Retail Monthly Golden week lifts

Figure 1 retail sales Retail rents and retail sales value Year-on-year % change 30% During the Golden Week holiday period at the start of 25% October, Mainland visitors to Hong Kong increased 17% 20% 15% year on year, to reach about 770,000. There was significant 10% growth in retail sales at major shopping centres, with the 5% 0% jewellery and watch industry reporting a 50% gain in sales -5% over the period, compared with last year. Retail prices and -10% -15% rents are set to grow more than 20% over 2011. -20% 1995 1997 1999 2001 2003 2005 2007 2009 2011

Headlines pre-leased a 1,300-sq-ft, ground-floor Retail rents Retail sales value shop in Melbourne Plaza, Central for Source: Census and Statistics Department / Rating and (0016.HK) is Valuation Department / Knight Frank spending HK$400 million on major asset HK$1.6 million per month or HK$1,230 per Note: three-month moving average of year-on-year growth enhancement at Grand Century Place in sq ft—up 146% from the current lease. Figure 2 , which is expected to raise the Meanwhile, a watch retailer pre-leased Visitor arrivals number of shops from 207 to 224. After the three ground-floor units totaling 2,862 sq ft in Manley House, Tsim Sha Tsui for a Year-on-year % change overhaul work is completed in 2014, the 60% company is confident that foot traffic will monthly rent of about HK$6.5 million or 50% increase and spending (on a per-capita HK$2,270 per sq ft—up over 300% from 40% basis) will rise by 12%. Currently, the mall the current lease. The six-year lease will 30% receives 200,000 daily visitors on weekdays start in 2013. 20% and 230,000 visitors on weekend days, and With robust retail sales in Hong Kong on 10% the average spending is HK$3,500 for locals the back of strong consumption power of and HK$5,000 for Mainland tourists. both locals and tourists—especially those 0% from the Mainland—prices and rents of -10% British fashion retailer Burberry will prime street shops increased 13.6% and -20% reportedly take up Nokia’s premises at 16.5%, respectively, during the first nine -30% Jan 2009 Jul 2009 Jan 2010 Jul 2010 Jan 2011 Jul 2011 units A and B, the ground to first floors, months of 2011. They are expected to gain Soundwill Plaza, Russell Street in more than 20% over 2011. Mainland Non-Mainland Causeway Bay. The 5,200-sq-ft shop was Source: Hong Kong Tourism Board / Knight Frank pre-leased for a monthly rent of HK$6.5 Retail sales million or HK$1,250 per sq ft, up 251% from Figure 3 the previous lease. Burberry will also In September 2011, Hong Kong’s retail Retail property prices and rents reportedly take up about 20,000 sq ft of sales value increased for the 25th Jan 2007 = 100 space in Pacific Place, Admiralty for a consecutive month, rising 24.1% year on 220 year to HK$31.2 billion. In the first nine monthly rent of around HK$2 million. This 200 is almost half of the space currently months of 2011, the total retail sales value occupied by Lane Crawford, whose lease grew 25.4% compared with the same 180 period in the previous year. will soon expire. 160 Shops in prime retail areas remained Visitor arrivals 140 sought after, with a number of leasing transactions involving rents of over In September 2011, the number of visitor 120 HK$1,000 per sq ft reported in the past arrivals to Hong Kong grew 16.8% year on 100 month. A telecom store renewed its year, reaching 3.2 million. The number of 45-sq-ft, ground-floor shop in Sincere Mainland visitors—comprising 65.7% of 80 2007 2008 2009 2010 2011 Plaza, Mong Kok for HK$83,000 per month total arrivals—surged 28.8% to 2.1 million, or HK$1,844 per sq ft—up 18.6% from the while that of visitors from other parts of Retail price index Retail rent index previous lease. Jewellery retailer Pandora the world remained stable at 1.1 million. Source: Rating and Valuation Department / Knight Frank

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Table 1 Selected sales transactions in core areas

Major retail sales transactions District Building Floor / unit Gross Price Price with prices reaching over floor area (HK$ (HK$ per HK$100,000 per sq ft were (sq ft) million) sq ft) recorded in the past months. Causeway Hoi To Court Ground-floor 504 $67.28 $133,492 Bay / unit 15

Tsim Sha Pearl Oriental Ground-floor 145 $15 $103,448 Tsui Tower / unit G

Causeway President Ground-floor 65 $5.1 $78,462 Bay Shopping / unit 31B Centre

Tsim Sha Rise Commercial Ground-floor 190 $13.8 $72,632 Tsui Building / unit 26

Mongkok Ground-floor 400 $14.1 $35,250 / unit 19

Source: Economic Property Research Centre Note: All transactions are subject to confirmation.

Table 2 Selected leasing transactions in core areas

A number of major retail leasing District Building Floor / unit Gross Monthly Monthly floor area Rent Rent (HK$ transactions were recorded in (sq ft) (HK$) per sq ft) core areas, on the back of strong retail sales. Tsim Sha Pacific Star Ground-floor 592 $480,000 $810.8 Tsui Building / units C-D

Mong Kok Pakpolee Ground-floor 484 $230,000 $475.2 Commercial / unit 1 Centre

Mong Kok Hung Hay Ground-floor 650 $125,000 $192.3 Building / unit 1

Causeway Tang Fai Building Ground-floor 410 $73,000 $178.0 Bay / unit C

Causeway Cigna Tower Ground-floor 1,198 $210,000 $175.3 Bay / unit s 7-9

Source: Economic Property Research Centre Note: All transactions are subject to confirmation.

Table 3 Movement of prime-street shop rents in Oct 2011 (compared with Sep 2011) All major retail districts saw Central Causeway Bay Tsim Sha Tsui Mong Kok month-on-month rental growth

in October 2011. Rent movement

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RESEARCH

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