NewWorld Development Company Limited
EXECUTIVE VICE-CHAIRMAN’S REPORT
24
HONG KONG INVESTMENT
PROPERTY
The retail industry in Hong Kong was
undergoing an adjustment stage.
Since the launch of the Individual
Visit Scheme in 2003, the spending
by inbound visitors from Mainland
China has been a strong support for
the Hong Kong retail industry and the
rental of retail shops. Nevertheless,
with more experience in travelling
and spending, the rapid growth of the
middle class, and the implementation
o f t h e Ce n t r a l Go v e r nme n t ’ s
anti-corruption policies, inbound
visitors from Mainland China have
demonstrated prominent changes
in their consumption patterns, from
the preference for high-end luxury
goods and jewellery and watches to
mid-range brands and mass market
products gradually, and from touring
core tourism districts to sightseeing
a t p e r i p h e r a l a r e a s o f l o c a l
neighbourhoods. Meanwhile, local
consumption maintained a steady
pace of development, under the
favourable economic climate and low
unemployment rate in recent years.
The pursuit from youngsters and the
middle class for trendy and unique
lifestyle drove relevant consumption,
attracting some brands with the same
style establishing their footprints in
Hong Kong for the first time.
In response to the opportunities
brought by the above changes, many
mall owners had in recent years
proactively reviewed the layout
and visitor flow of their projects,
enhanced the variability in physical
facilities, reshuffled the brand and
retail mix and brought in assorted
themes and activities, aiming at
uplifting the appeals, catering for the
changing consumer taste, and in turn
stabilising the rental performance
of the projects. For some street
shops at prime retail locations, the
diminished sales performance of
luxury goods had led to the removal
of relevant luxury brands which used
to be willing to lease at higher rents,
and in turn heightened vacancy rate
of those street shops. In view of this,
and owing to the lower variability of
street shops as compared to malls,
the sole strategy available to these
owners was to adjust rental rates to
attract the original and new tenants to
lease, resulting in a larger downward
pressure on the rental rates of street
shops at prime retail locations.
The overall sentiment of economic
activities in Hong Kong was positive,
with expedited business expansion
of enterprises relating to banking
and finance sectors, including the
commencement of operations in
Hong Kong for many enterprises
eng a ged i n f i n a n c i a l s e r v i c e s
following the official launch of
Shanghai-Hong Kong Stock Connect
at the end of 2014. Furthermore, the
interest rate cut policy promulgated
in Mainland China since 2014 and the
reduction in deposit reserve ratios for
financial institutions by the People’s
Bank of China gave rise to the
sufficient capital in Mainland China
and its flow to the Hong Kong capital
market contributing to the robust IPO
activities in Hong Kong. In the first
half of 2015, Hong Kong, being the
first time, raised the most funds from
IPO in the world. The entry of newly-
listed enterprises stimulated the
demand for quality office space. In
June 2015, the vacancy rate of office
buildings in Central was 1.7%, which
was the lowest since the outbreak
of global financial crisis in late 2008.
The vacancy rate in the overall market
