The retail real estate market suffered the largest impact in 2020 form the Covid-19 pandemic but can only improve this year, JLL Macau representatives said in the real estate consultancy company year-end property review.
“The current vacancy rate and future supply of retail properties have reached a high level in the recent year. Retail rents are expected to face pressure in the short term,’ JLL Macau Head of Leasing, Oliver Tong, stated today.
Retail sales fell by 52.2 per cent year-on-year in the first three quarters of 2020 to MOP26.9 billion (US$3.3 billion), with all retail categories saw a drop in their sales, mainly due to the drop in tourist numbers.
According to JLL, the total expenditure by tourists contracted dramatically and made up only 11.7 per cent of the total retail sales, while tourism-dependent categories all experienced a drop in their sales value by over 50 per cent.
Only 256 retail property transactions were recorded in the first 10 months of 2020, down 32.3 per cent year-on-year, with the leasing market seeing a more significant adjustment.
“Some of the retail spaces in the core Senado Square area were taken up by tenants at rentals 50-80 per cent lower than that paid by the previous tenants. Demand mainly came from retailers of household commodities, clothing and cosmetics,”
The sales value of supermarket was also said to have risen by 9.4 per cent year-on-year, supported by the increasing domestic demand, and the retail leasing market in the Senate Square neighbourhood areas remained stable, with some shop spaces having a 5-10 per cent increase in their rentals.
According to JLL Macau Retail Index, the overall retail rental values fell by 27.8 per cent year-on-year while overall retail capital values declined by 27.6 per cent in 2020.
However, Tong considered that the local retail market has “bottomed out” as the Covid-19 pandemic has been under control locally and mainland Chinese visitors have resumed travelling to the city.
“There are more retailers enquiring about retail leasing spaces in the core areas though they remain very cautious. According to market information, the retail sales of luxury goods is generally expected to see the biggest rebound. In fact, it’s been proved that the consumption power of local people remained strong amid either the recent Covid-19 pandemic or the past economic recessions,” the JLL Head of Leasing added.
“Despite the lack of 30 million visitor arrivals in 2020, the spending by 700,000 local residents still managed to make up 50 per cent of the total retail sales value that Macau could achieve pre-pandemic. Retailers for sure will pay more attention to local demand in the future. In the meantime, some retailers expanded their business to online platform to attract more customer interest and enhance turnover”