Tue. Dec 6th, 2022
Disruption Report #64: Bricks and Mortar Is Back, Container Rates Are Down, and Hong Kong Ends Hotel Quarantines

BRICKS AND MORTAR RETAIL IS BACK

After several years of a downward spiral, more stores are opening than are closing. That’s according to a Wall Street Journal article by Kate King. The report, “Retail Real Estate Is Enjoying Its Biggest Revival in Years,” has this to say:

U.S. retail vacancy fell to 6.1% in the second quarter, the lowest level in at least 15 years, while asking rents for U.S. shopping centers in the quarter were 16% higher than five years ago, according to real-estate services firm Cushman & Wakefield.

Retail Real Estate Is Enjoying Its Biggest Revival in Years,” Kate King, wall street journal, Oct. 4, 2022

For the first time since 1995, more stores opened last year than closed. The question, of course, is why and how. The answer is that we are at the end of a decades-long adjustment in what once was an over-stored retail landscape. That plus successful online retailers opening physical outlets are driving the renaissance.

CONTAINER RATES CONTINUE TO DECLINE

I was struck by the container price quotes I received today from a Chinese logistics firm.

  • Shangai/Ningbo – Tacoma $2400/40′
  • Qingdao–Boston: $5850/40′
  • Shenzhen–Miami:  $6200/40’Shenzhen–
  • Edmonton: $5800/40′

That Shanghai quote looks like old times. Why are prices coming down? The demand for containers has fallen off the table, with ocean freight orders off by 20% in September and October. The biggest reason for the fall is the amount of product currently sitting in domestic warehouses.

Ocean carriers placed orders for new ships and containers last year and the year before. They are beginning to arrive. The additional vessels and containers will increase supply at a time when demand is low. For that reason, I predict a sustained period of bargain ocean freight prices.

HONG KONG REOPENS WITH BABY STEPS

Hong Kong’s government has removed mandatory hotel quarantines for arriving visitors. This is an improvement, but life in Hong Kong is still challenging for those who want to visit. Here is how Bloomberg writers Kari Soo Lindberg and Shirley Zhao describe the ordeal in their article, “Hong Kong Businesses Push For Full Reopening to Revive City.”

Travelers to Hong Kong no longer need to undergo hotel quarantine or take a PCR test before departure, the city’s leader John Lee announced on Friday. Instead, arrivals will be restricted from going to bars or eating at restaurants for three days, while they will need to test daily for seven days. If they test positive, they will need to isolate for at least seven days.

Hong Kong Businesses Push For Full Reopening to Revive City,” Kari Soo Lindberg and Shirley Zhao, Bloomberg, September 28, 2022

I have spoken with the Hong Kong Trade Development Council, who told me the Hong Kong Toys & Games Fair will take place in January. That is a good thing, as is the end of the hotel quarantines. If the other restrictions continue to be in place, it will be challenging for them to get exhibitors and attendees to make the trip.

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