In Q2 2025, Hong Kong’s retail sector continued to face structural challenges. The strong Hong Kong dollar and cross-border consumer spending diversion led to a loss of local purchasing power. Although inbound tourist arrivals increased by 16% year-on-year, this growth did not translate into actual retail sales. The overall quarterly retail sales rose by only 0.3%, reflecting weak market recovery momentum.
However, amid the sluggish environment, value retail concepts and cultural-entertainment events emerged as bright spots. Japanese household goods brand 3 Coins opened in Causeway Bay, sparking a buying frenzy. Local budget furniture brand T.momo Shopping Mall accelerated its expansion, and financial institutions enhanced customer experience through physical flagship stores.
Additionally, international events such as Art Basel and the Hong Kong Sevens attracted high-spending visitors, with hotel occupancy rates reaching 90%, demonstrating Hong Kong’s continued international appeal, according to Savills in its Market in Minutes – Hong Kong Retail Leasing report of August 2025.
- Cross-border spending becomes normalised: A study by the Chinese University of Hong Kong shows that among AlipayHK’s 4.5 million active users, over two-thirds (around 3 million people) are now regular mainland shoppers. Nearly half of their spending goes to services, while 28% is spent on retail. The geographic scope of consumption has expanded from Shenzhen and Guangzhou to cities like Zhongshan and Chongqing.
- Wave of store closures continues: Over 300 retail stores shut down in the first half of the year, with the F&B sector accounting for 70% of closures. The cinema industry saw a 16% year-on-year drop in total revenue, with 10 cinemas closing down.
- Budget retail expands against the trend: International and local budget brands (such as 3 Coins and Tao Do Do) are rapidly expanding, while the 'two-dish rice' takeaway model is emerging across multiple districts, reflecting a trend of consumption downgrade.
- Cultural and entertainment economy boosts foot traffic: Major events like ComplexCon and Art Basel drove an 18% increase in high-spending overseas visitors, generating approximately HKD 8.8 million in related spending. Corporate demand was strong, with all 60 corporate boxes at the Hong Kong Sevens sold out.
- Infrastructure projects lay the foundation for long-term recovery: Initiatives such as “Skytopia” development, Hung Hom Promenade revitalisation, and the Victoria Cove waterfront district aim to reshape Hong Kong’s tourism appeal through diverse leisure experiences.
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, “In response to the current market conditions, landlords need to proactively adjust their tenant mix and introduce resilient new business models. In the short term, lifestyle brands with competitive pricing and experiential retail concepts will serve as stabilisers for the leasing market. In the medium to long term, landlords should capitalise on the dividends of cultural-entertainment economy and infrastructure development, enhancing asset value through business model innovation and spatial transformation. Market expectations suggest that retail rents in prime districts will decline by 0% to 5% in the second half of the year.”