As economic activity picks up in Hong Kong, there have been a few notable retail and residential leasing trends in the market. On the retail side, Cynthia Ng of Retail Services expects convenience stores to continue to expand, and for property investment, Jason Fung of Valuation & Advisory Services notes that due to the current low point in the market, now is a good time to snap up deals at attractive rates. To see what could be, read the latest Colliers Weekly Snippet to find out more.
Convenience stores to expand further
Japanese supermarkets and convenience stores are trending with more expansions in the market. AEON STYLE has newly leased a large space of 25,000 sq. ft. at Shop B of G/F and the whole of 1/F at Gala Place in Mong Kok. This is half the space of the ex-H&M space whilst the other half was leased to Foot Locker on G/F for 18,000 sq. ft. at the end of last year.
There is a number of new convenience stores transactions that are locating on prime second-tier high streets. 711 has newly leased Shop J at Po Ming Building in Causeway Bay that’s approximately 1,000 sq. ft. Another 711 has been newly leased on the G/F & B/F at 40-42 Des Voeux Road Central. It was reportedly circa 56% lower than the previous rental being paid for the previous tenant.
We should expect to see more convenience stores expand as they allow accessible purchasing as well as targeting great customer loyalty on their promotion programme with various popular cartoon dolls and lego redemption.
A FOMO trend of the real estate market
The sale of Causeway Bay’s first government tendered land lot (IL 8945) since 1997 caused a stir in the market when it was announced that a partnership between Hysan Development (who have a strong profile in the district), and Chinachem Group had won the site. The sale was recorded at about 15% above the market’s expectation, setting the joint venture back HK$19.8 billion (equating to HK$18,374 per sq. ft. on a maximum GFA of 1,076,390 sq. ft.).
While many are hailing this as a show of confidence returning to a troubled market amid a stubborn COVID-19, this is one of many transactions that has been made considerably higher than the market’s estimation. Number 73 Mount Kellett Road made headlines when it leased earlier this month for HK$228 per sq. ft. per month (HK$1.6 million a month for the 7,022 sq. ft. property) beating the previous record set by House No.1 at 11 Plantation Road only two months earlier at HK$125 per square foot per month (HK$1.35 million a month for 10,804 sq. ft.).
Under normal circumstances, these high-profile transactions would be an indication of recovery for the office, retail and residential sectors. But many feel that these moves are more a case of FOMO (fear of missing out) on the side of the buyers/leases. With many landlords and owners offering relaxations to tenants through rent-free periods and rental concessions, and sales being made at reduced prices, the fact that some are willing to pay up to 15% above the market’s consensus stands out even more.
The current low point in the market should be a good time to snap up deals at attractive rates. While it can be argued that the highlighted transactions admittedly are for unique or once-in-a-lifetime opportunities, buyers should be aware of the relationship between the deals they are pursuing and the wider market situation, and consider whether the site/property is truly worth paying over the odds.