Falling sales and rising rents are forcing a shake-up of Hong Kong's retail sector as under-performing retailers are forced to shut outlets in prime locations and move to cheaper outlying areas.

The exodus has left retailers of luxury branded merchandise favoured by mainland buyers, such as watches and jewellery, to take up the space vacated by outlets that cater for lower-spending local consumers.

In some cases, changes in the local retail landscape are also triggered by events on the mainland, such as the country's largest electrical appliance chain, Gome Group, closing its 8,000 square foot flagship outlet in Mong Kok last month.

South China Morning Post