hongkong retail 4q 2012

8/13/2019 HongKong Retail 4Q 2012

1/6

HONG KONG RETAILMARKET

www.colliers.com/hongkong

RESEARCH & FORECAST REPORT

4Q 2012 | MARKET OVERVIEW

MARKET INDICATORS FORECAST

OVERALL PERFORMANCE

NEW SUPPLY

TENANT DEMAND

INCENTIVES

RENTS

CAPITAL VALUES

YIELDS

Market Sees A Shift In InvestorBuying Patterns

In the investment market, government policy restrictions on the residential sector encouraged

investors to park their money in the commercial sector. The overall number of investment sales of

retail units with a lump sum of HK$10 million or more, increased substantially by 105% QoQ in

4Q 2012. Given the limited buying options in prime shopping locations, investors put their focus on

second and third-tier streets in core shopping areas or looked for investment opportunities in non-

core districts. In anticipation of increasing demand in the sales market and the subsequent price

growth, yields in the four traditional shopping districts will continue to compress in the near term.

Looking ahead, local consumers tend to be more cautious about spending, as they expressed worries

about next years economic outlook and inflation continues to apply pressure on consumer budgets.

Many believe Hong Kong will be hit by declining economic performance in the US and the Europe.

The caution over the economic outlook will scale back local consumption and tourist spending.

The dip in retail sales growth has yet to forced property owners to slim down their asking rents.

A cautious leasing demand environment is expected to slow rental growth. Status as a growth

region is still intact due to the buoyancy of the tourism industry, sustained demand from overseas

retailers, an extreme lack of prime retail space, increasing household income and rising inflation.

These factors are expected to offset the uninspiring global economic conditions. Overall, average

retail rents are expected to grow 9% over the next 12 months.


2/6P. 2 | COLLIERS INTERNATIONAL

HONG KONG | 4Q 2012 | RETAIL

Source: Hong Kong Tourism Board

Source: Census & Statistics Department, HKSAR Government

Improved Spending Sentiment

Thanks to the healthy labour market, local consumer sentiment improved during 4Q 2012. China

saw a revival in growth, which suggests the economy has bottomed-out. The purchasing power

of mainland tourists in Hong Kong continued to drive the citys retail sales. However, the unsteady

external environment could affect the local economy and consumer sentiment down the road.

The limited supply of prime shopping premises, expanding inbound tourism and inflationary pressure

created a positive environment for the retail leasing market. With that in mind, rental rates continued

to grow in 4Q 2012, albeit at a slower pace in view of the unresolved Europe debt crisis and the

still-struggling United States economy.

THE EVER-RISING TOURISM MARKET

The number of inbound tourists continued to soar. According to the latest figures released by the

Hong Kong Tourism Board (HKTB), Hong Kong saw a total of 12.2 million inbound visitors during the

three-month period ending November 2012, increasing by 16.3% YoY. This was mainly underpinned

by 8.9 million mainland Chinese visitors and accounted for 73% of total arrivals.

RETAIL SALES

The growth pace of retail sales accelerated in 4Q 2012. In November 2012, thanks to a stable job

market and a surge in Mainland tourist arrivals. The total value of retail sales increased to 9.5%

YoY, up from 4.6% in August 2012.

Jan-01

Jul-01

Jan-02

Jul-02

Jan-03

Jul-03

Jan-04

Jul-04

Jan-05

Jul-05

Jan-06

Jul-06

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

Jan-10

Jul-10

Jan-11

Jul-11

Jan-12

Jul-12

Total Arrivals Arrivals from China (% of total)

ArrivalsfromC

hina(%o

fTotal)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

NumberofArrivals(Million)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

VISITOR ARRIVALS

9.5%

Jan-98

Jul-98

Jan-99

Jul-99

Jan-00

Jul-00

Jan-01

Jul-01

Jan-02

Jul-02

Jan-03

Jul-03

Jan-04

Jul-04

Jan-05

Jul-05

Jan-06

Jul-06

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

Jan-10

Jul-10

Jan-11

Jul-11

Jan-12

Jul-12

Retail Sales Vaue (HK$ mn.) % YoY

-30,000

-20,000

-10,000

0

10,000

20,000

30,000

40,000

50,000

RetailSales(HK$Million)

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

Growth(%Y

oY)

HONG KONG RETAIL SALES


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COLLIERS INTERNATIONAL | P. 3

Aug-01

Dec-01

Apr-02

Aug-02

Dec-02

Apr-03

Aug-03

Dec-03

Apr-04

Aug-04

Dec-04

Apr-05

Aug-05

Dec-05

Apr-06

Aug-06

Dec-06

Apr-07

Aug-07

Dec-07

Apr-08

Aug-08

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Apr-11

Aug-11

Dec-11

Apr-12

Aug-12

7,871

13.7%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

ValueofTotalRetailSales(HK$Million)

Value of Jewellery, Watches andClocks & Valuable Gifts

YoY

-60.0%

-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

140.0%

ProportiontoTotalRetailSalesVolume(%)

VALUE OF RETAIL SALESSales of Jewellery, Watches and Clocks, & Valuable Gifts

Source: Census & Statistics Department, HKSAR Government

SALES OF HIGH-END PRODUCTS SAW A REBOUND

Spending by mainland visitors in Hong Kong was driven by renewed confidence in their economy.

The sales value of jewellery, watches, clocks and other valuable gifts saw a reboust rebound,

climbing by 13.7% YoY in November 2012. Meanwhile, the sales of medicine and cosmetics recorded

a growth of 13.1% YoY and clothing increased by 8.2% YoY.

The strengthening of the yuan and Hong Kongs lower tax rates are two factors that keep luxury

products, cosmetics and handbags popular. Hong Kong will still attract mainland shoppers, especially

those from second- and third-tier Chinese cities where luxury retailers are not well-established.

CAUTIOUS EXPANSION AMID GLOBAL UNCERTAINTY

Considering the uncertainties over the global economy, international retailers continued their

expansion plans, albeit with a more cautious approach. New overseas brands still actively looked

for prime locations in Hong Kong to set up their flagship stores before continuing with expansion

into China or the greater Asia region.


4/6P. 4 | COLLIERS INTERNATIONAL


Source: Colliers* Street level shops on key street segments(Nov-2011 = 100)

RETAIL RENTAL INDEX BY MAJOR DISTRICTS (*)

DISTRICT Q Q Q Q Q Q Q Q Q Q

(% QoQ)

Causeway Bay .%

Central .%

Mong Kok .%

Tsim Sha Tsui .%

Overall .%

Rental Trends

RENTAL GROWTH REMAINED INTACT

Property owners were less aggressive in their rental demands, as the slower retail sales growth

throughout 2012 curtailed retailers business profits and hindered their ability to pay soaringrents. However, the extreme lack of prime shopping space for lease and sustained demand from

international retailers continued to support retail rental growth.

During 4Q 2012, Hugo Boss committed to lease 24,000 sq ft of space in Central Building for a

monthly rent of about HK$6 million. The flagship store covers 4,000 sq ft on G/F and 20,000 sq

ft in basement, with a unit rent of about HK$250 per sq ft per month. According to our research,

the average retail rental rates in the four traditional shopping locations rose 1.4% QoQ in 4Q 2012,

following a growth of 2.3% QoQ in 3Q 2012.

Strong demand for first-tier streets in core shopping areas continued to spill over to second-tier

streets, populated by local retailers that were forced to move out of core locations during the last

rental rally. This pushed rents up on neighbouring streets. Furthemore, second-tier streets, such

as Causeway Bay, witnessed stronger rental growth that outpaced growth in first-tier streets.

Investment Market ActivityTHE MARKET SAW A SHIFT IN INVESTOR BUYING PATTERNS

Government policy restrictions on the residential sector had encouraged investors to park their

money in the commercial sector. The overall number of investment sales of retail units with a

lump sum of HK$10 million or above increased substantially by 105% QoQ in 4Q 2012.

Given the limited buying options in prime shopping locations, investors focused on second and

third-tier streets in core shopping areas or looked for investment opportunities in non-core districts

such as Tsuen Wan.

RETURN OF SHORT-TERM TRADERS

Between June and November 2012, the number of retail properties sub-sold before their original

sales transactions were completed (i.e. confirmor sales) surged 67% YoY from that of the same

period in 2011. A batch of retail shops was sold by confirmor during 4Q 2012. After acquiring the

retail podium at Park Hotel in Tsim Sha Tsui for HK$2,200 million in October 2012, the premises

recorded confirmor sales in some of the ground floor shops, fetching a total of about HK$1,764

million in 4Q 2012.


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COLLIERS INTERNATIONAL | P. 5

Jan-01

May-01

Sep-01

Jan-02

May-02

Sep-02

Jan-03

May-03

Sep-03

Jan-04

May-04

Sep-04

Jan-05

May-05

Sep-05

Jan-06

May-06

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

Sep-11

Jan-12

May-12

Sep-12

Long Term Average:2,122 m

0

5,000

10,000

15,000

20,000

TotalValue(HK$million)

25,000

RETAIL SALES TRANSACTION ABOVE HK$10 MILLION

Source: Colliers

YIELD COMPRESSION

The further-compressed retail investment yield suggested that prices are growing at a faster rate

than rents. The overall retail investment yield edged down 20 basis points from 2.6% in July to

2.4% in October 2012, according to the latest figures by the Rating and Valuation Department.

Meanwhile, the average yield of prime retail premises in traditional shopping locations remained

low at 2.0%. In anticipation of increasing demand in the sales market and the subsequent price

growth, yields in the four traditional shopping districts wil l continue to compress in the near term.

Source: Rating and Valuation Department

Jan-03

Apr-03

Jul-03

Oct-03

Jan-04

Apr-04

Jul-04

Oct-04

Jan-05

Apr-05

Jul-05

Oct-05

Jan-06

Apr-06

Jul-06

Oct-06

Jan-07

Apr-07

Jul-07

Oct-07

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

Oct-11

Jan-12

Apr-12

Jul-12

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

RETAIL YIELD


6/6

COLLIERS INTERNATIONAL (HONG KONG)

LIMITED

Suite 5701 Central Plaza18 Harbour Road WanchaiHong Kong

TEL +852 2828 9888

FAX +852 2828 9899Company Licence No: C-006052

Simon Lo

Executive Director | Research & Advisory | Asia

TEL +852 2822 0511

FAX +852 2868 5275Email [email protected]

522 offices in62 countries on6 continentsUnited States: 147Canada: 37Latin America: 19Asia Pacific: 201EMEA: 118

$1.8 billion in annual revenue in 2011

1,250 million square feet under management

Over 12,300 professionals

Copyright 2013 Colliers International.

The information contained herein has been obtained from

sources deemed reliable. While every reasonable effort hasbeen made to ensure its accuracy, we cannot guarantee it.

No responsibility is assumed for any inaccuracies. Readers

are encouraged to consult th eir professional advisors prior

to acting on any of t he material contained in this report.


Richard Kirke

Managing Director | Hong Kong

TEL +852 2822 0699

FAX +852 2107 6047Email [email protected] Licence: E-279867

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Forecast

Index

(Nov

2011=

100)

HONG KONG RETAIL RENTAL INDEX

Source: Colliers

Market OutlookLocal consumers tend to be more cautious about spending, as they expressed worries about next

years economic outlook and inflation continues to apply pressure on consumer budgets. Many

believe Hong Kong will be hit by declining economic performance in the US and the Europe.

The caution over the economic outlook will scale back local consumption and tourist spending.

The dip in retail sales growth has yet to force property owners to slim down their asking rents.

A cautious leasing demand environment is expected to slow rental growth. Status as a growth

region is still intact due to the buoyancy of the tourism industry, sustained demand from overseas

retailers, an extreme lack of prime retail space, increasing household income and rising inflation.

These factors are expected to offset the uninspiring global economic conditions. Overall, average

retail rents are expected to grow 9% over the next 12 months.

hongkong retail 4q 2012

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