What: The retail rental price evolution is usually a great manner to understand where the challenges are.

Why it is important: HK has for long remained the commanding location when it comes to retail. Three years after the pandemic, things have changed.

Hong Kong's Tsim Sha Tsui, previously the world’s most expensive retail district, has slipped to third place globally behind New York's Fifth Avenue and Milan's Via Montenapoleone. Tsim Sha Tsui now commands annual rents of US$1,493 per square foot, compared to US$1,766 in Milan and US$2,000 in New York. The decline in Hong Kong is attributed to the pandemic's impact on tourism and a period of civil unrest, resulting in a 39% drop in rents.

Despite this downturn, Tsim Sha Tsui remains the most expensive retail destination in Asia-Pacific, followed by Causeway Bay and Tokyo's Ginza. Hong Kong's stringent pandemic measures led to a tourism and retail recession, causing Upper Fifth Avenue in New York to overtake Tsim Sha Tsui as the world's costliest shopping area last year.

Cushman & Wakefield notes that Hong Kong's retail recovery is resilient, supported by growth potential from a low base during Covid-19. However, shifts towards "retailtainment" and experiential offerings are changing the retail landscape. This shift might discourage luxury brands from expanding in Hong Kong, as local brands and businesses like pharmacies increasingly take up retail space. The trend of mall operators using entertainment features to attract customers is growing, reflecting consumers' desire for unique shopping experiences.

Despite the recovery of Hong Kong's tourism and retail sectors, visitor spending on shopping remains below pre-pandemic levels. The changing retail landscape, e-commerce growth, a strong Hong Kong dollar, and competition from neighboring cities pose challenges for Hong Kong retailers. As a result, innovative retail solutions are being implemented to stay competitive.

World’s priciest retail streets