Exit Lane Crawford, in comes Burberry
British luxury brand Burberry plans to take over a major part of the space that speciality department store Lane Crawford currently occupies in Pacific Place in Admiralty.
Swire Properties, a wholly owned subsidiary of Swire Pacific which owns the mall, said Burberry had committed to take up about 21,000 sq ft over two storeys for its flagship store. It is expected to open in the second half of 2012.
'It will become the Burberry brand's biggest outlet in Hong Kong,' a person with knowledge of the deal said. The store will carry a full range of fashion lines for men, women and children, and have a cafe.
It will be Burberry's flagship store for Asia and its second-biggest in the world.
Lane Crawford will close its Pacific Place branch when its lease expires in February 2012. It currently occupies about 50,000 sq ft in the mall.
'I believe that Burberry will target mainland shoppers,' said another individual. 'It is not the hottest brand among Hong Kong shoppers, but it is a darling of mainland Chinese.'
Burberry prices have steadily increased and are now comparable to those of top-end luxury brands such as Chanel and Louis Vuitton, said an industry observer.
But Burberry still generated strong sales, especially across the region, and this has prompted the company to expand rapidly, she said. Burberry delivered strong results for the year ending March 31, with retail revenues up 36 per cent and now representing 64 per cent of total revenue.
Burberry opened seven stores this year in the region, of which five were in Hong Kong. The company has said it would emphasis flagship openings and refurbishments in high-profile locations, including Hong Kong.
Property consultants said international retailers and local jewellery brands have been competing for prized space in Hong Kong, pushing rents to new highs.
A watch and jewellery shop will replace Staccato, a shoe store, at a 1,000 sq ft spot at Melbourne Plaza in Central and will pay rent of HK$1.6 million a month, according to Jeannette Chan, Jones Lang LaSalle's head of retail for Hong Kong and southern China. The landlord initially sought a rent of HK$1.2 million, but strong demand pushed up the price.
Retailers were willing to pay the steep rents because of robust sales and tourist spending, Chan said.
Retail sales grew at an annual 27.8 per cent to HK$33.1 billion in May. In the first five months of the year, retail sales were up 23.6 per cent year on year.
According to the Tourism Board, visitor arrivals in the first five months of the year increased 14.5 per cent over the same period in 2010. The number of mainland arrivals rose 65.5 per cent, while those coming under the individual visit scheme increased 32.6 per cent.
Chan expected local consumer confidence to remain strong and tourist spending to remain a key driver for retail revenue growth. The stronger yuan was also likely to continue to support demand for luxury goods in the foreseeable future.
This positive outlook is likely to see retailers' rents continue to climb but at a slower pace throughout the second half of the year, according to Joe Lin, senior director of retail services for CB Richard Ellis.
In one of the largest leasing transactions so far this year, clothing brand Abercrombie & Fitch leased several floors in the Pedder Building in Central for about HK$7 million a month.
The past few months have also seen luxury car dealers signing up for new retail spots. Rolls-Royce, Maybach, McLaren and Bugatti have all committed to establishing new shops on Hong Kong Island.
LVMH (Watch) will replace Great Shanghai Watches & Jewellery and rent a 600 sq ft shop in Russell Street, Causeway Bay, paying HK$1.5 million a month, and Taiwan's Eslite Bookstore will open a 50,000 sq ft store in Hysan Place, Causeway Bay.
But CBRE's Lin said a hidden threat to Hong Kong's retail property market might be Beijing's plan to cut the mainland's import tax on luxury goods - a move aimed at spurring domestic consumption and restoring trade imbalances, key objectives of the nation's five-year plan to 2015.
Such a cut would hurt retail sales in Hong Kong, he said.
The increase in retail sales in Hong Kong in the first five months of the year, against the same period in 2010