The slow death of small businesses in Hong Kong

Over the past decade, car-repair shop owner Benny Chan has seen more than 70 per cent of his small-business peers disappear as his neighbourhood fills up with high-end Western bars and Japanese restaurants.

"Rents here are going up multiple times," said Chan, who has been in business since 1985 in Tai Hang, just east of the Causeway Bay shopping district. "We'll all be out of here in the next four to five years."

Rents are climbing in areas near Causeway Bay and Hong Kong's other prime shopping districts, where luxury stores attract free-spending tourists from the mainland. That is squeezing out family-owned shops, congee and noodle vendors and other small businesses like Chan's as developers and landlords seek to profit from the trend.

"There's only a limited supply of good spots and the rents are super high" in major shopping districts, said Joe Lin, senior director for retail services at CBRE Group. "It's natural that restaurants and some retailers would find these fringe areas with an equally hip, high-spending crowd more attractive."

Shops in Causeway Bay fetch an average of US$2,630 per square foot a year, the highest in the world, according to a November report by broker Cushman & Wakefield. For a 500 square foot shop, that is an annual rent of US$1.32 million. Across the harbour in Tsim Sha Tsui, retailers including Dolce & Gabbana and Chanel pay US$1,547 per square foot annually. Retail rents in the Central business district, where banks including Goldman Sachs and UBS have offices, are US$1,856 a year.

Developers are taking advantage of the opportunity. Soundwill Holdings, a mid-sized local builder, last year completed a 163-unit residential building in Tai Hang and has begun work on another. A block away, the company has plans for a 65,000 sq ft project with Henderson Land Development.

"It's only a 15-minute walk from the world's most expensive shopping location," Soundwill executive director Dickson Lau, referring to Tai Hang's proximity to Causeway Bay, said in the clubhouse of the 37-storey tower. "With all the new restaurants and apartments, there'll be a huge upgrade in the standard of living in this area."