Briefing Retail Leasing
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Savills World Research Hong Kong Briefi ng Retail leasing October 2018 Image: ifc mall SUMMARY Decelerating retail sales in July and August resulted in minimal rental growth in both shopping malls and street shops. Mainland brands, especially F&B translate into stronger retail sales brands, are gaining ground in Hong because of lower spending per capita "The highly anticipated rally in Kong and are targeting mid to high and a change in spending patterns. price points. the retail market is unlikely to 84,000 mainlanders travelled to International sports brands are Hong Kong via the new Guangzhou– fully materialize as landlords and expanding rapidly to capitalise on Shenzhen–Hong Kong Express Rail retailers recalibrate expections increasingly active lifestyles. Link over the fi rst two days of the October Golden Week, benefi tting Tung for the fourth quarter.” The retail sales recovery is losing Chung MTR Line malls. Simon Smith, Savills Research some momentum as retail sales growth in the fi rst eight months decelerated to Shopping centre and street 12.2% YoY. shop rents fl attened as landlords and retailers adopted a much more A record-breaking number of cautious stance given current macro mainland tourist arrivals did not uncertainties. savills.com.hk/research 01 Briefi ng | Hong Kong retail leasing October 2018 Market commentary TABLE 1 Mainland brands are proving to be Mainland brands in Hong Kong, Q3/2018 a welcome addition to the retail scene in Hong Kong. Over the past Category Brand Type of goods few years, successful Chinese brands have established branches MO&Co. High-end fashion Fashion in prime retail locations and are Balabala Kids fashion gaining in popularity among local Hong Kongers. Many of these Miniso Lifestyle products brands are F&B and provide various Lifestyle NOME Lifestyle products / Homeware specialty Chinese cuisines such as Sichuan-style hot pot (Haidilao, Morri Sofa Furniture Xiao Yu Hotpot Restaurant and Hero Gui Tea Tea retailer Shu), Beijing cuisine (Xiheyayuan), Food retail Shanghainese cuisine (Jardin de Juewei Snack retailer Jade) and light refreshment, such as Qfang Real estate agency cheese bubble tea (Hey Tea). Services China Mobile Telecoms In more positive news mainland Hey Tea Light refreshment brand Xiaomi, a smart phone and consumer electronics manufacturer, Haidilao Hot pot has set up a new fl agship store in Xiheyayuan Peking duck Chong Hing Square, Mong Kok with F&B an eye to boosting sales and building Jardin de Jade Shanghai cuisine brand awareness. Meanwhile Xiaoyu Hot Pot Restaurant Hot pot NOME has joined Miniso in selling Hero Shu Hot pot lifestyle products with three new stores opening this year. MO&Co., a Xiaomi Consumer electronics mainland fashion house, has opened Electronic and Tech Huawei Smart phone alongside other high-end brands in Fashion Walk, Causeway Bay and Jewellery Lao Feng Xiang Jewellery Elements, Kowloon Station (using the brand name MO&Co. Edition 10) Source: Savills Research & Consultancy as high-end shopping malls become TABLE 2 more receptive to mainland offerings, Sports brands opening in shopping malls, Q3/2018 hoping to bring more variety and differentiate themselves from others. Brand Location What about other brands? An Nike Mira Place, TST increasing health-conscious population is fueling the rapid Puma Elements, Kowloon expansion of sports brands. We Gigasports Elements, Kowloon (to be opened) believe that sportswear is one of the major factors behind the growth in Source: Savills Research & Consultancy retail sales in the Clothing, Footwear TABLE 3 and Allied Products category over the fi rst eight months of the year (10.2% Other new brands opening in Hong Kong, Q3/2018 YoY). Capitalising on this trend, Country of Type of Size large sportswear retailers including Brand Location Origin goods (approx.) Nike and Puma have opened new outlets in Mira Place and Elements East Point City, Hang Hau 1,200 sq ft OWNDAYS Japan Glasses respectively in the third quarter of TMT Plaza 1,400 sq ft 2018. Gigasports will follow suit with a planned new store in Elements as Jins Japan Glasses APM, Kwun Tong 1,000 sq ft well. The opening of new sportswear Beijing Road, TST Foot Locker US Footwear 22,000 sq ft shops in prime shopping malls (ex-Esprit store) indicates the increasing willingness New Town Plaza, Shatin n/a Footwear & Charles & Keith Singapore of shopping centre owners to include accessories Parker House, 72 Queen’s n/a goods at very different price points. Road Central, Central A Happy Pancake Japan F&B Lee Garden 3, CWB n/a The strong retail sales growth in fi rst half of 2018 threw into relief Source: Savills Research & Consultancy savills.com.hk/research 02 Briefi ng | Hong Kong retail leasing October 2018 GRAPH 1 a disappointing July and August. Retail sales by sector, Jan 2013 – Aug 2018 Over the fi rst eight months, retail sales rose by 12.2% YoY with other Overall Retail Sales Value (RHS) Overall Retail Sales market segments such as Medicines Food, Alcoholic, Drinks and Tobacco Clothing, Footwear and Allied Products and Cosmetics (16.7% YoY) and Jewellery, Watches and Clocks and Valuable Gifts Medicines and Cosmetics 80 60 Jewellery, Watches and Clocks & Valuable Gifts (22.4% YoY) recording 60 50 healthy growth fi gures. However, July 40 and August dragged down the year- 40 HK$ billion to-date fi gure, recording only single- 20 digit growth in overall retail sales 30 YoY% 0 over the two months. This may be 20 a sign of things to come as a weak -20 Renminbi, the ongoing trade spat -40 10 between China and the US, rising interest rates and generally cooler -60 0 real estate markets take their toll on consumer spending. Source: Census and Statistics Department, Savills Research & Consultancy Despite a record-breaking summer in terms of the number of mainland GRAPH 2 tourists, this was not refl ected Mainland visitor arrivals, Jan 2013 – Aug 2018 directly in retail sales. The fi rst eight months of 2018 saw a 13.8% YoY increase in the number of mainland Overnight (LHS) Same-day (LHS) YoY Change: Overnight YoY Change: Same-day visitors, supported by the strongest 6 60% summer vacation (July and August) 50% 5 to date with 9.23 million mainland 40% tourist numbers surpassing the 30% 4 previous peak of 9.16 million in 2014. 20% 3 10% The growth was largely accounted 0% for by the rapid increase in same-day Persons (Million) Persons 2 -10% visitors (17.5% YoY) over the fi rst -20% eight months, rather than overnight 1 -30% visitors (8.7% YoY). As mainland 0 -40% visitors, especially overnight visitors, have switched their spending from luxury brands to more affordable items, it is highly likely that the Source: HK Tourism Board, Savills Research & Consultancy lower spending per capita led to the less-than-surprising retail sales GRAPH 3 growth. Convenience items such as YoY growth in retail sales in major shopping malls, medicines and cosmetics are still 1H/2018 among the favourite purchases of Chinese tourists. Mainland contribution: High Medium Low 40% It will be interesting to see how 35% the recently opened Guangzhou– 30% Shenzhen–Hong Kong Express Rail Link (XRL) impacts the travel patterns 25% of mainland visitors to and around 20% Hong Kong in the near future. A total HK Retail Sales of 84,000 mainland visitors travelled 15% Value YoY: 13.4% to Hong Kong via XRL over the fi rst 10% two days of the October Golden Week. Elements, the premium 5% shopping mall near the West 0% Kowloon Terminus has already seen Harbour Times Citygate Hysan Langham Pacific Festival Cityplaza a noticeable increase in mainland City Square Outlets Portfolio* Place Place Walk visitors since the opening of the new Source: Company announcements, Savills Research and Consultancy * Hysan Portfolio consists of Lee Theatre Plaza, Leighton Centre, One Hysan Avenue, Hysan Place and Lee Gardens. cross-border railway link. The new savills.com.hk/research 03 Briefi ng | Hong Kong retail leasing October 2018 link could also benefi t other shopping GRAPH 4 malls along the Tung Chung MTR Savills shopping centre rental index, Q1/2008 – Line, such as ifc for those pursuing Q3/2018 a luxury shopping experience or Olympian City for those looking for ALL HKI KLN NT more popular high street fashion 600 brands and lifestyle products. 500 Thanks to the strong fi rst quarter results, the fi rst half fi gure for retail 400 sales growth in prime shopping malls remained high. Though most 300 key shopping malls outperformed 2003 = 2003 = 100 overall retail sales in the fi rst half, 200 there is a slight concern that we may see a weakening of sales growth 100 YoY in some of the shopping malls in Q3, refl ecting the more cautious 0 spending patterns of shoppers in Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 both mainland- and local-dependent 08 09 10 11 12 13 14 15 16 17 18 malls. Source: Savills Research & Consultancy After a long period of stagnation, strong growth in shopping mall rents GRAPH 5 in Q2/2018 suggested that the tide Savills prime street shop rental index, Q1/2008 – was fi nally turning for landlords. Q3/2018 However, the third quarter saw shopping centre rents revert to a fl at ALL Central Causeway Bay Tsimshatsui Mongkok trend with an overall change of -0.4% 500 recorded QoQ. Shopping malls in 450 Kowloon were largely responsible for the decrease with a -1.2% change 400 over the previous quarter, while malls 350 on Hong Kong Island and in the New 300 Territories remained unchanged.