Hong Kong retail: Chinese restaurant chain Peking Hotpot leases massive space in Central at 40% discount

Restaurants and retailers in Hong Kong are locking in leases for large spaces amid a revival in consumer sentiment and rising tourism numbers.

A few lucky tenants are still finding bargains, as the city’s retail property sector continues to steadily recover from the onslaught of the pandemic that saw thousands of shops and restaurants close.

Peking Hotpot, a mainland Chinese restaurant chain, has leased nearly 6,000 sq ft on the ground floor of Peter Building on Queen’s Road, Central, to open its first restaurant in Hong Kong.

The restaurant’s owner, Beijing-based Jingyu Catering Group, has agreed to a monthly rent of HK$341,000 (US$47,650), or HK$58 per square foot, according to a property agent familiar with the matter. The new rent was nearly 40 per cent lower than the previous lease of HK$550,000 per month, the agent said.

The tenant is carrying out renovations and is likely to open the restaurant next month.

An increase in tourism numbers and consumer spending on food and drinks bodes well for the retail sector and the economy in general.

A total of 34 million tourists visited the city last year, 65 per cent of the pre-pandemic level, and exceeding the forecast of 30 million. Tourism industry participants expect the numbers to return to pre-Covid levels this year, a much needed tonic for the beleaguered sector.

The restaurant sector’s sales in the third quarter increased by 12.5 per cent year on year to HK$27.1 billion, according to official data.

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As a result of the improving economy, rental values for high street shops and prime shopping centres rose 14.8 per cent and 2.7 per cent, respectively, in 2023, according to data from JLL.

However, high street shops’ rents are still more than 70 per cent below the historical peak seen in the third quarter of 2014, with the vacancy rate still at an elevated 11.6 per cent at the end of last year.

Peking Hotpot currently has 10 outlets in China, with seven of them in Beijing, according to its website. The others are in Chengdu, Guangzhou and Wuhan.

Chinese retail operators accounted for 24 per cent of the retail debuts in Hong Kong in 2023, from 5 per cent a year earlier, making them the most active among the new incoming brands, according to JLL.

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The retail sector will continue to recover in 2024, according to Oliver Tong, head of retail at JLL Hong Kong. But there are downside risks because of dampened domestic consumption and frequent forays by Hongkongers into the mainland in search of bargains and value for money, he added.

“We expect high-street shops to enjoy higher rental growth in 2024 as most prime shops have been taken up,” Tong said.

Rents of high-street shops may rise 5 to 10 per cent this year, while those of prime shopping centres by zero to 5 per cent, he said.