Retail market sees emerging leasing demand

HONG KONG, January 24, 2024 – Hong Kong’s retail market witnessed increasing leasing demand from mainland Chinese operators in December last year, while Microsoft Datacenter Holdings pre-committed a long lease in a new data centre facility, according to JLL's latest Hong Kong Property Market Monitor released today. The emerging demand will contribute to the improvement of the retail and industrial markets.

In the retail market, more operators from mainland China are expanding their footprint in Hong Kong’s retail market. Recently, MuWu BBQ debuted their first store in Hong Kong at a G/F shop unit of Chong Hing Square in Mongkok for a reported monthly rental of HKD268,000, about 4% above the rental of the last lease by Bread Show. The size of the shop is about 2,583 sq ft.

Cathie Chung, Senior Director of Research at JLL, said: " Among all non-local brands entering Hong Kong for the first time, operators from mainland China accounted for 5% in 2022, and the share rose to 28% in 2023. The number of new brands from mainland China surged by more than ten times last year, reflecting a remarkable expansion of mainland Chinese operators into Hong Kong, with F&B operators the most aggressive in the expansion. We will see this trend continue in 2024 due to the strong preference among Hong Kong residents for Chinese cuisine, the increasing popularity of northbound travel, and the distinct advantages of Hong Kong as a platform for mainland Chinese brands to expand globally."

The industrial market also recorded a rare case of new lettings. According to EPRC, Microsoft Datacenter Holdings pre-committed to a long lease of a portion of GDS’s upcoming data centre facility – HK2, in Kwai Chung. The facility is expected to come on stream in 2025 with the lease ending in 2041.

Kai Chui, Senior Director of Data Centre Services Solutions Development at JLL in Asia Pacific, said: "As digitization, automation, and AI computing soars, so does the need for data centres that can handle the complex and massive tasks of AI algorithms, machine learning models, and big data processing. Data centres require scalable and reliable infrastructure and networks, however the traditional challenge is the scarcity of new supply and buildings suitable for conversion into high-capacity data centres in the city. Despite this challenge, Hong Kong remains a prime destination for institutional investors and Data Centre operators, thanks to its strong data processing demand, highly skilled workforce, natural disaster-free environment, and stable power supply."