Although Hong Kong’s retail industry is said to be reeling from the declining number of mainland tourists, the city is still the leading luxury shopping destination in Asia, says a new report from real estate consultant JLL.
Hong Kong is the world’s second most appealing luxury retail destination after London, according to JLL’s Destination Retail 2016 report.
The study also reveals that seven of the top 10 cities with the highest presence of luxury retailers are in the Asia-Pacific.
The research, which for the first time provides a global ranking of cities by their appeal to cross-border retailers, reveals that Hong Kong is second only to London in popularity.
Also among the top 10 are Tokyo, Shanghai, Singapore, Beijing, Osaka and Taipei.
“Hong Kong remains Asia’s leading luxury shopping destination with many retailers using it as a springboard for expansion into mainland China,” says James Assersohn, JLL’s director of retail for the Asia-Pacific.
“While there has been a noticeable slowdown in luxury sales in the city due to China’s slowing economy and the government’s anti-corruption crackdown, Hong Kong continues to attract many high-spending mainland tourists.”
“More broadly, the dominance of Asian cities in the index highlights the attractiveness of the region to retailers, thanks to its burgeoning middle classes and growing levels of affluence,” explains Assersohn.
Tokyo, which takes fourth place globally, has seen a revival in luxury retailer’s demand for high quality real estate as a result of an improving economic climate and rising tourism numbers.
The yen, which has devalued by nearly 30 percent since 2012, has made Japan a magnet for retail tourism across the region.
International visitors to Japan rose 47 percent in 2015 over the previous year with the largest contingent being from mainland China.
A weaker yen is also encouraging Japanese citizens to make the most of their luxury purchasing power at home.
Shanghai, ranking sixth on the list, is catching up fast on Hong Kong to become one of Asia’s leading luxury retail destinations and still remains mainland China’s premier shopping destination.
“Thanks to a diverse economy and wealthy consumer base, Shanghai has become a favorite place for international brands to test the Chinese market and gain brand exposure, sometimes bypassing Hong Kong in the process,” says Assersohn.
Also on JLL’s cross-border luxury retailer attractiveness index are Paris in third place; New York, fourth; Singapore and Dubai, seventh; Beijing, ninth; and Osaka and Taipei sharing the 10th place.
“Overall performance of the luxury sector will depend not only on economic growth, but on factors such as volume of travel and increase in the number of high-income households.
“As such, the strong growth in high-income households forecast in Asian cities in the next 15 years should mean that Asia remains at the forefront of luxury spend growth, both domestically and abroad,” concludes Assersohn.
Terence Chan, head of retail at JLL in Hong Kong, said: “International brands targeted on the mass and mid-markets are active in Hong Kong’s retail leasing market. They are usually sport, accessories, bank, shoe and F&B retailers.
“The recent rental correction gave them a good opportunity in Hong Kong’s retail market. We expect the street rent will drop 10-15 percent this year. ”