2024 Hong Kong Retail Property Market: Navigating Trends and Uncovering Investment Opportunities

According to data from Midland Business Information Research Department, 273 industrial and commercial property transactions were recorded in October, reflecting a 3% increase from September’s figure of 265. The total consideration for these transactions amounted to HK$2.596 billion, representing a notable month-on-month decrease of approximately 40.5%. Compared to August's total of 263 transactions, this marks a slight increase of about 3.8%.

The performance of the three segments of commercial properties varied:

-      Industrial units: 144 transactions, up 10.8% month-on-month.

-      Offices: 59 transactions, remaining stable.

-      Retail Shops: 70 transactions, down 7.9%.

The commercial property market is expected to continue experiencing low-price transactions, with medium and small-priced properties likely dominating the landscape. Regardless of the outcome of the U.S. elections, significant changes in U.S.-China relations are not anticipated in the short term. Following the removal of all restrictions in the residential property sector, developers have adjusted their pricing strategies, focusing primarily on primary residential properties. To attract buyers, landlords in the commercial sector have been compelled to reduce their sales prices, resulting in a trend of "price decline with increasing volume."

In the retail segment, there were 739 transactions totaling HK$13.62 billion by October, representing a 14% decrease in transaction volume and a 5.7% decrease in value compared to the same period in 2023, which recorded 859 transactions and HK$14.442 billion. The average transaction value rose to HK$18.4 million, a 9% increase from HK$16.8 million in 2023. This rise is partly due to 19 transactions exceeding HK$100 million in the past ten months, reflecting strong demand in the food and beverage sector driven by tourism recovery.

An analysis of 648 registered retail transactions conducted by Memfus Wong in 2024 focused on transaction values and district distributions. In terms of value:

-      Transactions for shops valued over HK$10 million to HK$20 million accounted for 113 cases, or 17.4% of the total.

-      The second-highest value range, over HK$5 million to HK$10 million, recorded 102 cases.

-      Transactions below HK$1 million totalled 98.

Retail Transactions Distribution:

Over HK$10M to HK$20M: 64 transactions were recorded in Kowloon, comprising 56.6% of the total 113 cases. The leading sub-districts were Mongkok (18), Sham Shui Po (17), and Kowloon City (11), primarily featuring ground-floor shops in livelihood areas.

Over HK$5M to HK$10M: Kowloon again led with 56 cases (54.9% of the total), with Sham Shui Po and Kowloon City being the top sub-districts. One notable transaction was the sale of a shop 57 at 1/F in Golden Shopping Centre, 148-152 Fuk Wa Street, which sold for HK$5.38 million, a 44.4% decrease from its previous sale of HK$9.68 million in September 2008.

Below HK$1M: 45.9% (45 cases) of this category were in Kowloon, with the top three sub-districts being North Point, Sham Shui Po, and Tsim Sha Tsui. These transactions were predominantly for arcade shops with saleable areas ranging from 20 sq.ft. to 196 sq.ft. The above arcade shops transactions (23) were contributed by four arcades: MAXI BASE (City Garden, North Point), Metro Sham Shui (Kam Wah Mansion, Sham Shui Po), The Capital (Park Hotel), and TST Plaza (Chevalier House) in Tsim Sha Tsui. The transaction values ranged from HK$0.1 million to HK$1 million.

The overall retail shop transaction performance indicates a preference among investors for small-scale investments, particularly in a high-interest rate environment. Shop owners continue to reduce prices, and further low-price transactions are expected in the future, with medium and small-priced shop transactions likely to dominate the market.

After the completion of the U.S. presidential election, it is expected that the U.S. will maintain its hardline stance towards China. As a result, the election results are anticipated to have minimal impact on U.S.-China relations. Additionally, the recent 25 basis point reduction in interest rates by the U.S. Federal Reserve and the subsequent cuts by local banks in Hong Kong are expected to further lower borrowing costs. This is likely to attract investors to the market and improve the investment atmosphere in the commercial property sector.