HK now second for shop rents
Hong Kong moved up one place to register the world's second most expensive shop rents, as tourist spending rose. With average rent at US$1,695 per square foot per year, the city ranks after New York's Fifth Avenue in a report by property consultant CB Richard Ellis (CBRE) on global retail rents in the third quarter. Annual rents have risen 52.8 per cent in the city this year.
'In spite of the uncertain economic outlook, retailers see Asia as a growth area and are actively seeking opportunities either to establish a foothold or expand operations here,' said Edward Farrelly, the head of CBRE's Hong Kong research division.
'Hong Kong is a key destination as it has the added advantage of exposure to mainland China.'
Retail rent in the city rose 6.2 per cent quarter on quarter in the third quarter from 2.2 per cent in the previous quarter, Farrelly said.
New York rents stayed at US$1,900 per square foot per annum. Sydney ranked third, at US$1,224, followed by London and Zurich, the report said. Guangzhou was 10th, Beijing 14th and Shanghai 20th.
CBRE said rents had levelled off in many cities around the world as the euro-zone crisis continued to hammer consumer confidence.
Rents in New York rose 5.6 per cent this year, meaning Hong Kong was closing the gap, Farrelly said.
Joe Lin, a director of retail services at CBRE, said: 'Tourist spending continued to be the growth engine of Hong Kong retail sales.'
Lin said rents in prime districts continued to rise on the back of demand by international brands.
Hong Kong retailers continued to relocate their shops to non-prime areas, pushing up rents in second-tier retail locations as well, especially those adjacent to prime areas.
Another property consultant, Jones Lang LaSalle, said the recent correction in global stock markets did not have a noticeable impact on Hong Kong's retail market. Total retail sales in the city grew 27.5 per cent year on year in the third quarter, bringing the year-to-date growth to 25.4 per cent.
Visitor arrivals increased 19 per cent year on year in the third quarter.
Jones Lang LaSalle said in a recent report that luxury brands in particular remained optimistic and were continuing their expansion plans. Longchamp, for example, has leased 7,974 sq ft over three floors at Silvercord shopping centre in Tsim Sha Tsui for HK$7.5 million a month.
Farrelly said: 'The buoyant employment situation, together with the prevailing strength of inbound tourism, continues to bode well for the retail sector in the near term.'
Against this backdrop, the outlook for retail demand, especially in prime locations, was likely to remain strong, with retail rents expected to maintain positive growth in the coming months, he said.
The increase in visitor arrivals to Hong Kong so far this year