Hong Kong is experiencing its deepest retail sales slump since 2003, when the outbreak of Severe Acute Respiratory Syndrome disease emptied malls.
How to keep mall traffic flowing when wealthy mainland shoppers have turned lukewarm toward Hong Kong and the local economy is slowing in tandem with China’s?
Developers are searching for the answer by bringing in new tenants offering free yoga classes, champagne and caviar pop-up bars, and gelato.
Spending Patterns
"Customer spending patterns have changed, and we are constantly revisiting the trade mix," said Fiona Shiu, general manager of Pacific Place.
Double-digit rent growth was the norm during a decade when sales were powered by hordes of mainland Chinese shoppers loading up on Louis Vuitton handbags and Dior jewelry. With those tourists taking their spending to Paris, London and Tokyo, and with online competition gaining ground, mall owners are staring at steep rental declines.
After the Boom
Arrivals of Chinese tourists fell 18 percent during the first two months of 2016 compared with the same period last year, according to Hong Kong government data, while their retail spending fell 8.3 percent in 2015, after nearly a decade of double-digit growth.
"In the past 10 years, most shopping centers were driven by mainland shopper requirements for gold, jewelry, luxury labels and cosmetics," said Helen Mak, senior director of retail services for Hong Kong at Knight Frank LLP. "It’s probably the end of that chapter."
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