Knight Frank: The total retail sector in Hong Kong is expected to remain stable this year but will face pressure from rent adjustments and price changes

The Zhitong Finance App learned that on June 10, McHelen, senior director of Knight Frank and head of the retail department, said that in the first four months of this year, the Hong Kong retail market faced significant downward pressure. The total retail sales volume was tentatively estimated at HK$28.9 billion, down 5.6% from the previous year. Despite this, McHelen expects the total retail sector to remain stable throughout the year, but the pressure of rent adjustments and price changes will increase.

As consumers' shopping patterns change, the local retail landscape in Hong Kong is gradually shifting from traditional shopping to diversified exploration experiences. Facing this transformation trend, McHelen pointed out that the Hong Kong retail industry needs to adjust its business strategy in a timely manner. The future of retail will no longer be limited to selling products; retail outlets should be transformed into platforms for brands to build closer ties with customers. Although this shift may reduce overall rent levels and retail property valuations, it also brings new opportunities for creative use of space and diversification.

In terms of the investment property market, Lin Xiaodong, executive director of Knight Frank Investment Department, analyzed that in the first five months of this year, the Hong Kong investment market recorded a total transaction volume of HK$14 billion, the same as the same period last year, but the number of transactions fell 7% year on year.

In terms of property types, office properties account for the largest share of market transactions, accounting for 52% of total transactions. They mainly benefit from strong demand from users for concessions and bank transactions, including the Hong Kong Stock Exchange's purchase of the 42nd to 50th floors of Central Exchange Square One, which attracted market attention.

Hotel and serviced housing transactions followed, accounting for 20% of market transactions, and recorded a significant increase of 430% year over year. Lin Xiaodong said that this increase is mainly due to the government's active promotion of attracting non-local university students and implementing policies such as the “High-end Talent Pass Program.”

In terms of retail properties, the market is still facing challenges due to weak local consumption and high labor costs, accounting for only 9% of total transactions, while land for development accounts for 4%.

Looking ahead to the second half of 2025, Lin Xiaodong expects the market focus to shift to student accommodation and education-related asset classes, mainly driven by the pilot program introduced by the government. Furthermore, the Hong Kong Government has also promised to fully support local universities in attracting more international students, especially in the context of the US's recent tightening of visa policies for Hong Kong and mainland students, which is expected to further stimulate demand for student accommodation.