Pop-up stores expected to sprout across Hong Kong as sales rise and retail vacancies decline

Things are looking up for Hong Kong as sales are finally on the rise again with a 5.7% increase in combined October-November retail sales in 2017 compared to the same period in the previous year. Hong Kong is one of the primary shopping destinations in Asia and the uptick in retail sales growth reflects an improvement in tourism and the resilience of local consumption.

As sales rebound, tenants who had until recently considered leaving their space are instead choosing to renew their leases resulting in retail vacancies along tier one streets declining by 1.8% quarter-on-quarter. In its quarterly analysis, CBRE says the high street shop vacancy rate will likely drop even further in the coming months and rental decline will come to an end.

The recovery ends a long period of rationalization in the retail sector, with local watch and jewelry chains announcing plans to expand stores in high street locations. This will likely result in increased rents in prestigious shopping areas like Causeway Bay, which has seen a healthy correction over the last few years and as a result greater diversification in the retail mix with more lifestyle brands entering the district.

As the retail landscape in Hong Kong continues to evolve with a more customer-centred and experience-based approach, pop-ups are expected to sprout across the city. New brands entering the market will want to tap into the ongoing retail sales growth without committing to long-term lease agreements at first. Large store owners and mall operators that want to benefit from the pop-up trend could consider subdividing their retail space in a way that makes it easier to lease. Not only would pop-ups enable both store owners and brands to benefit from the sales growth, it also provides shoppers with a more diverse and engaging experience which encourages repeat visits.

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