In the first quarter of 2025, Hong Kong's retail industry displayed a divergent development amid multiple challenges. Despite subdued local consumption and intensified cross-border competition leading to an overall retail sales decline of 6.5% year-on-year, international brands and mainland enterprises continue to strategically enter core business districts, reflecting confidence in the market's long-term potential. Additionally, the strengthening of the Hong Kong dollar has resulted in an 11% year-on-year increase in the number of net outbound tourism. However, the record high number of visitors during the Labour Day holiday in May 2025 did not translate into retail earnings, highlighting a shift in consumer behaviour—mainland tourists now prefer short and cost-effective experiential trips, and the price advantages of nearby areas like Shenzhen have diverted purchasing power. Against this backdrop, sports and health, the physical presence of e-commerce, and cultural and entertainment activities have become new highlights in the market, while the government's large infrastructure projects are paving the way for medium- to long-term recovery, according to Savills in its Market in Minutes – Hong Kong Retail Leasing report of May 2025.
- Increased outflow of consumption: The strong HKD exchange rate has increased the appeal of cross-border spending, leading to declines of 0.6% and 1.8% in the total value and volume of restaurant receipts, respectively, in Q1. As of May 2025, a number of catering establishments have ceased operations.
- Divergence between tourist arrivals and retail performance: During the Labour Day holiday, inbound visitors surged 20% YoY to 920,000, but RMB depreciation and Shenzhen's competitive prices weakened spending momentum in Hong Kong. Moreover, same-day returning mainland tourists rose sharply by 12% YoY, underscoring the shift in consumption patterns.
- Emerging sectors buck the trend with expansion: Mainland fashion brands (e.g., Urban Revivo), e-commerce physical stores (Taobao, JD.com), and financial service flagship outlets (Futu Securities) are concentrating their presence in core business districts.
- The rising popularity of of sports and wellness: Landlords in Central and Causeway Bay are revamping tenant mixes by introducing premium fitness centres, pickleball facilities, and other emerging sports-leisure facilities in response to growing local demand for health-focused consumption.
- Long-term growth drivers: High-profile entertainment events—such as concerts by global superstars like Coldplay, Rugby Sevens, and Art Basel—coupled with infrastructure developments like the "Skytopia" project, are poised to reshape retail demand.
Mr. Jack Tong, Director, Research & Consultancy of Savills commented, “Hong Kong’s retail sector is navigating a period of uncertainty with decline in tourist spending. Despite that, the continued expansion of sports, fashion and financial brands from both overseas and Mainland into prime retail segments signals some renewed optimism among these retailers.”
Mr. Barrie Chan, Senior Director, Retail of Savills said, “Property owners must accelerate business model innovation—such as integrating art exhibitions into retail spaces—to maintain competitiveness amid high-interest rates. Prime street shops and shopping mall rents are projected to decline 5% annually, though government policy support could prove pivotal in reversing the trend.”