Hong Kong is changing its retailing face

Hong Kong is changing its retailing face

According to latest news from Hong Kong it seems that the Island is no longer the preferred shopping area for Mainland China. On the other hand, more Chinese are travelling to Europe and it seems that especially Lucerne, Switzerland gains in retail sales, especially watches and other luxury items are bought increasingly by Chinese, but also Indian and Arab visitors

Retailers in Hong Kong are also shying away from the Central District because of the exorbitant 35 % rise of rents, for instance Swedish H&M Hennes & Mauritz is looking for a less costly location. The fashion chain had there its first flagship store of 2800 m2. But now lease is up for renewal and the rent set to double and therefore H&M intends to close the location next year and is looking for attractive alternatives. The actual location of H&M is being taken over by Spanish Inditex (Zara) and will pay a monthly rent of HKD 11 million (around USD 1.4 million), H&M paid only HKD 5.5 million per month.

The average rent along Queen’s Road Central in Hong Kong – also the location of H&M soared to USD 18731 per square foot in March or 35 % from a year earlier whereas New York’s Fifth Avenue average rents rose 23 % to USD 2633 m2, reports Collier International Real Estate Brokerage firm. Some potential global chains are simply bypassing China and are jumping into China or starting out in Southeast Asia. Before you needed first to have a foothold in Hong Kong in order to be successful in Shanghai (PRC), this is now no longer the case and the opening of the first store in Shanghai without previous presence in Hong Kong is respectable.

Debenhams, the British department store has rented two stores in Malaysia in cooperation with a partner and plans to enter Singapore in the coming months. For years Debenhams was looking for a convenient location in Hong Kong unsuccessfully. Some retailers are escaping high rents with the so called pop-up stores that open for just a few months at the time to test demand. Topshop, the British chain opened a location in May in Shenzhen (PRC) just across from Hong Kong and is closing it again in August. Oroton made a similar move and opened a store in September 2010 in Hong Kong and closing it in February 2011 but making use of Christmas and Lunar New Year shopping seasons!

Property experts expect that retail rents for prime shopping mall space will rise 13 % in Hong Kong in the ongoing year and another 10 % next year and the market is earmarked to become the most expensive retail rental globally. According to official Hong Kong statistics retail space on Hong Kong Island shot up 36 % in 2011, far beyond the 4.6 % increased in rents. A Hong Kong realty broker states: “Sooner or later the owner of the ships will have to rent the stores to cocaine dealers” and he advises clients not to buy retail space. The rents retailers are willing to pay are in direct relations with the expected revenues. It has also to be stated that Hong Kong always operates between success and bust in retailing!

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