MARKETVIEW Rental decline accelerates slightly amid resurgence in COVID-19 infections Retail market sentiment remained weak in Q4 2020 as a resurgence in COVID-19 infections hit Hong Kong. The decline in retail sales lost momentum towards year-end owing to the low base established in H2 2019, when sociopolitical unrest impacted local and inbound tourist consumption. Leasing activity was subdued despite the approaching festive season. Leasing demand from luxury retailers was almost non-existent. Retailers selling daily necessities signed several new leases as the decline in rents created opportunities for expansion. Several short-term leases helped pull down vacancy on tier I streets in the four core retail districts by 250 bps q-o-q to 15.7%. Overall high street rents fell by 8.9% q-o-q, bringing the full-year decline to -27.2%. Shopping mall rents were stable as developers invested in marketing and other promotional campaigns to support tenants. The full-year decline stood at -5.6%. The first few months of 2021 are likely to see additional shop closures as the fourth wave of the local pandemic continues. A lack of clarity about the resumption of inbound tourism will ensure retailers selling discretionary items remain in wait-and-see mode, at least for the duration of H1 2021. Hong Kong Retail, Q4 2020 Q4 2020 CBRE Research 2020 CBRE, Inc. | 1 -6.4% y-o-y (Oct & Nov) -35.3% y-o-y (Q3 2020) -99.8% y-o-y (Q4 2020) -8.2% y-o-y (Q3 2020) -8.9% q-o-q (Q4 2020) MARKETVIEW 0 20 40 60 80 100 120 0 50 100 150 200 250 300 200 4 200 5 200 6 200 7 200 8 200 9 201 0 201 1 201 2 201 3 201 4 201 5 201 6 201 7 201 8 201 9 202 0 Central Causeway Bay Tsim Sha Tsui Mong Kok Overall Shopping Malls (RHS) Q4 2020 CBRE Research 2020 CBRE, Inc. | HONG KONG RETAIL Figure 1: Rental Index for High Street Shops and Shopping Malls Figure 2: Rental Growth for Core Retail Locations vs. Retail Sales Growth Source: CBRE Research, Q4 2020. Source: Census & Statistics Department, HKSAR, CBRE Research, Q4 2020. Figure 3: Retail Sales Growth vs Restaurant Receipts Growth Source: Census & Statistics Department, HKSAR, CBRE Research, Q4 2020. 2 High Street Shop Rental Index (Q1 1996 =100) Shopping Malls Rental Index (Q1 2014 =100) -40% -30% -20% -10% 0% 10% 20% 201 3 201 4 201 5 201 6 201 7 201 8 201 9 202 0 y-o-y Overall Retail Sales Overall Restaurant Receipts -40% -30% -20% -10% 0% 10% 20% 30% 200 4 200 5 200 6 200 7 200 8 200 9 201 0 201 1 201 2 201 3 201 4 201 5 201 6 201 7 201 8 201 9 202 0 y-o-y Rental Growth for High Street Shops Retail Sales Growth MARKETVIEW Q4 2020 CBRE Research 2020 CBRE, Inc. | 3 HONG KONG RETAIL Source: CBRE Research, Q4 2020. Figure 4: Selected Leasing Transactions in Q4 2020 Tenant District Property Street No. Street Name Unit / Floor Size(sq. ft., GFA) Vita Green Causeway Bay Shun Hei Causeway Bay Centre 492 Lockhart Road G/F 1,100 red packet store Causeway Bay 545 Lockhart Road 545 Lockhart Road G/F 800 Homebake Central Melbourne Plaza 33-33A Queens Road Central G/F 1,500 mask store Central Hip Shing Hong Centre 55 Des Voeux Road Central G/F & 1/F 7,200 Bakehouse Central 5 Staunton Street 5 Staunton Street G/F 800 Mask Factory Tsim Sha Tsui Zhong Da Building 38-40 Haiphong Road G/F 1,750 OxyAIR Mask Tsim Sha Tsui Haiphong Mansion 53-55 Haiphong Road G/F 450 MARKETVIEW Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. CONTACTS CBRE HONG KONG OFFICES HONG KONG RETAIL