Hong Kong prime street shop rents to grow by up to 10% in 2026

The leasing market continued to gain momentum in Q2.

Hong Kong's retail market continued to strengthen in the first half of 2026, supported by a rebound in tourism, resilient luxury spending and improving leasing activity, with Knight Frank maintaining its forecast for prime street shop rents to rise by 5% to 10% this year.

According to Knight Frank, retail sales increased 7.9% year-on-year in May, while cumulative sales for the first five months of 2026 rose 10.6% to HK$171.5 billion. Luxury goods remained the strongest-performing segment, with sales of jewellery, watches, clocks and valuable gifts surging 25.8% year-on-year in May, following 20.5% growth in April. Knight Frank attributed the performance to the appreciation of the renminbi and a recovery in mainland Chinese visitor arrivals.

More domestically focused retail categories posted slower growth. Department store sales rose 9.2% year-on-year in May, while consumer durable goods increased 8.9%, although Knight Frank noted that growth in both segments has moderated.

Tourism continued to underpin the market, with mainland visitor arrivals reaching 26.71 million during the first half of 2026, up 13% year-on-year. Citing Hong Kong Tourism Board data, Knight Frank said per capita spending by mainland overnight visitors increased 3.8% to HK$5,305 in the first quarter, providing further support for luxury retail sales.

However, the consultancy said the tourism recovery continued to be offset by outbound spending. Between January and June 2026, Hong Kong residents made an estimated 61.8 million outbound trips, contributing to ongoing cross-border spending leakage and posing a challenge for retailers that rely more heavily on local consumer demand.

Knight Frank also highlighted the continued expansion of online retail, with e-commerce sales rising 32.3% year-on-year in May and accounting for 9.2% of total retail sales. The consultancy said growth has been driven by mainland Chinese e-commerce platforms expanding into physical retail. JD.com opened its first JD MALL outside mainland China in Wan Chai in June, with the 30,000 sq ft store reflecting the growing importance of experiential retail and potentially encouraging more online retailers to establish physical stores in Hong Kong.

Leasing activity in the prime street shop market also gathered pace. Knight Frank pointed to Hurlingham Polo leasing a 1,200 sq ft ground-floor shop at 112-114 Des Voeux Road Central for around HK$150,000 per month, a 36% increase on the previous rent. In Mong Kok, cosmetics retailer SaSa reportedly pre-leased a 2,430 sq ft ground-floor unit at Nathan Centre for about HK$450,000 per month, almost 30% higher than the rent agreed two years earlier.

According to Knight Frank, these transactions indicate improving momentum in the prime street shop sector, with landlords in selected locations beginning to secure rental increases. The consultancy therefore maintained its forecast for prime street shop rents to increase by between 5% and 10% in 2026.

Looking ahead, Knight Frank said it remains cautiously optimistic on the retail market. Mainland Chinese and international brands continue to favour prime shopping streets and major malls for new store openings as tourism recovers. However, the consultancy warned that structural challenges remain. While tenant sales in both prime and neighbourhood malls have returned to positive growth since 2025 and mid-tier malls have remained relatively stable, rental reversions continue to be negative. Knight Frank noted that the ongoing rise of e-commerce and persistent cross-border spending are expected to continue weighing on mass-market retail and the performance of mid-tier and neighbourhood shopping centres.