Has Peak Tower set rents at the height of folly?
Attraction will reopen with 7 new eateries, but insiders say that's too many, paying too much
Despite confidence in The Peak Tower's facelift, some industry insiders fear that high rents combined with new restaurants will spell disaster.
The Peak Tower - whose HK$100 million revamp aimed at encouraging visitors and locals to spend more time at the tourist attraction is nearing completion - has seven new restaurants, including the city's first Burger King outlet outside the airport, and a new viewing platform that will open before the end of October.
A restaurant chain owner in Hong Kong said he was offered a site but decided against it, partly because of the high rent.
'It's not too rational. People are going to have to work very hard to sustain that volume of business over time, because the rental is not cheap and there is a lot of competition. Somebody's going to have to lose money or just break even,' said the restaurateur, whose outlets are mostly in Central and Soho.
He expects Peak rents to go up by as much as 30 per cent when landlords negotiate new terms.
Other industry insiders are more conservative, predicting an increase of perhaps as little as 15 per cent. One source said new restaurants were being charged HK$60 to HK$80 per sq ft.
Lawrence Heung Ping-chung, director of retail for property adviser DTZ Debenham Tie Leung, expects retail rents to increase at The Peak by 10 per cent before year end.
Because food and beverage was the most profitable business on The Peak, rents for restaurants could go up by as much as 15 per cent, he said.
Another restaurant industry insider, whose company was also offered a site but turned it down, said: 'Hopefully these new restaurants will make it, but I think a lot of them are going to crash and burn.' The rents at The Peak Tower were comparable to, or even higher than those demanded by landlords in Lan Kwai Fong, where prices were HK$40 to HK$60 per sq ft, this insider said.
'You need to have more reasons to go to The Peak and you need a destination. Places like The Peak Lookout are really nice and unique, and you could go up there regardless of whether you are showing visitors around or you are with local friends. But if you open a bunch of different restaurants there, even if they were good ones, people would eat there if they passed by, but it's hard to get people to make the trip ... just to visit the restaurants.
Responding to the concerns, a spokeswoman for Hong Kong and Shanghai Hotels, which owns The Peak landmark, said: 'We feel that there is plenty of scope for many more and varied restaurants at The Peak Tower compared to before.'
Most restaurant owners are upbeat about the upcoming relaunch.
Martin Allies, whose Cafe Deco Group owns Cafe Deco, said: 'The Peak is back on the map again with the Peak Tower being almost operational, and it's going to give people a lot of choice.'
The Hong Kong and Shanghai Hotels spokeswoman noted that a third of the annual 7 million visitors to The Peak are local residents. The new restaurants could encourage them to pay a visit, she said. She confirmed rents had gone up, but would not discuss numbers.
The company said visitor numbers had increased every year, but refused to give exact figures or a prediction for the future.