A view of Russell Street in Causeway Bay. The street had, in 2012, overtaken New York's Fifth Avenue as the world's most expensive shopping street, but has since lost that honor as the mainland's economy slows down and cross-border visitor numbers plummet. Parker Zheng / China Daily

Hard-hit luxury brands in HK's priciest shopping areas make way for mass-market, local retailers

Mass-market retail is likely to be the order of the day in some of Hong Kong's priciest shopping districts, as luxury-brand operators continue to be battered by a subdued world economy and slumping tourist arrivals, particularly from the Chinese mainland.

Real-estate and industry experts are seeing no end to the downslide in retail rentals, with Causeway Bay - one of the city's prime shopping areas - having seen a plunge of between 20 and 50 percent in rental value from a year ago.

The exit of major luxury-brand tenants from these core shopping centers has not subsided despite hefty rent cuts by nervous landlords.

According to the Rating and Valuation Department's (RVD) latest data, the rental value of a ground-level shop at 60A, Russell Street, Causeway Bay, has now tumbled by about half to HK$6.84 million, compared with the previous financial year. Property agents revealed that the landlord has already slashed the rent by 50 percent from more than HK$1.2 million last month, but has yet to find a tenant.

Russell Street had, in 2012, overtaken New York's Fifth Avenue as the world's most expensive shopping street, but has since lost that honor as the mainland's economy slows down and cross-border visitor numbers plummet.

For Hong Kong Island, the average monthly rent for private retail premises in January this year slumped by almost 20.4 percent to HK$1,430 per square meter from HK$1,796 per square meter in June last year.

"Retail rents are expected to fall sharply due to dwindling demand in the retail market," warned Frank Wong, Hong Kong external affairs and public concerns committee member at the Royal Institution of Chartered Surveyors.

"This opens up more opportunities for local retailers - fast-fashion and lifestyle store operators - to secure prime retailing space," a Jones Lang LaSalle property research report in January said.

"The changing retail landscape will facilitate a more varied retailing environment away from luxury goods toward more affordable luxury and mass-market products," the report said.

Global property advisory firm DTZ/Cushman & Wakefield said in a separate property investment report: "Looking forward, as tourism arrivals and retail sales would continue to slide, the prospect for retail properties in traditional shopping districts is not expected to brighten significantly and, hence, landlords must slash their prices significantly to close transactions."

The firm predicted that the difference in performance (rental return) between core and non-core shopping districts will continue to diverge significantly as robust local spending will support the rental levels in those non-traditional/suburban shopping areas.

"High street rental prices are expected to decline 10 percent this year as upmarket retailers hold out for signs of a turnaround," cautioned Helen Mak Hoi-lun, retail services senior director at Colliers International.

Hong Kong's rental index for private retail premises slipped 3.2 percent to 179 in January, compared with 184.9 recorded in July last year, according to the RVD.

oswald@chinadailyhk.com

(HK Edition 03/16/2016 page1)