As Hong Kong retail sales recover, can landlords follow with higher shop rents?

Ever since Hong Kong’s retail sector shook off 14 months of consecutive declines in May, analysts have been speculating whether the city’s landlords and developers can look forward to rental increases sooner rather than later.

Hong Kong retailers such as Bakehouse and Korean food and beverage operator Seoul Recipe Group are more optimistic these days, as locals and tourists alike start to spend more in the city.

However, a meaningful recovery in rents for high street shops and prime shopping centres is likely to take time, according to analysts.

Bakehouse, the Hong Kong bakery famous for its sourdough egg tarts that have hordes of mainland Chinese tourists queuing up, reported profit growth of between 25 per cent and 29 per cent over the past three months, proof of a recovery in the city’s downtrodden retail sector.

“Bakehouse’s business has been great these past few months, with strong footfall and sales across all locations,” founder Gregoire Michaud said. “All our shops are very busy, thanks to a great mix of tourists from all over the world. Hong Kong retail is on the rebound, as consumer confidence is slowly returning and tourism is picking up momentum.”

The Wan Chai-based bakery – with eight outlets in the city, including two at New Town Plaza in Sha Tin and The Peak Tower – also increased production of its most popular product, the custard-filled flaky pastry tart, by 20 per cent, according to Michaud.