Banks fighting back against luxury shops for prime space
After being forced to leave the best locations because of soaring rents, bankers are now looking to return to the areas they initially vacated
Sandy Li and George Chen
Sharp-suited bankers are fighting to return to prime locations in Hong Kong where soaring rents had previously forced them to make way for global luxury labels.
While some capital-hungry banks have turned to smartphone-backed internet banking platforms to save the cost of maintaining physical branches, others are more committed to bricks and mortar. These banks see expanding their network as a rare opportunity to catch up with rivals in terms of marketing.
Standard Chartered, one of the city's big three banks, said it would invest HK$1 billion to set up a regional private banking service centre in Central to serve the bank's high-end individual clients. It agreed to lease the entire five-floors of space at The Forum in Exchange Square late last year and has signed a leasing agreement with Hongkong Land, the biggest landlord in Central.
Another major local bank is set to lease 20,000 square feet of a five-level shop on Canton Road in Tsim Sha Tsui, one of the busiest shopping streets in the city, for a monthly rent of HK$6 million, or HK$300 per square feet, according to a property market source.
"It will mark the first time a bank has returned to Canton Road, which is fully occupied by global fashion brands catering to mainland shoppers," the source said.
Food and beverage operators, and banks have been edged out by luxury jewellery and watch retailers and international brands along Canton Road over the past six or seven years owing to soaring rents.
Taking advantage of softening retail rents in prime locations, he said it was the turn of banks to take up these valued spaces.
Last year, Citibank closed seven branches in Hong Kong for various reasons including cost-saving efforts and expired leases. Citibank said in June this year that it planned to add six new branches over the next 12 months.
Banking sources said many banks, including Citibank, are competing with each other for prime locations to open new branches.
Australia's ANZ and Singapore's DBS are widely considered in the industry as two of the most aggressive foreign banks, adding new branches and spending big on marketing and advertising to promote their retail banking business in the city.
Some market watchers say banks may get a break in competition with luxury shops for space, partly owing to Beijing's anti-corruption campaign that has resulted in weak luxury-brand sales this year.
However, it does not mean rents will sink sharply. Colliers International expects retail rents of street-level shops in key shopping districts such as Tsim Sha Tsui and Causeway Bay to grow by 8 per cent over the next 12 months.
Citibank recently agreed to renew the lease for its branch in Yee Wo Street, Causeway Bay for a monthly rent of HK$1 million, say people familiar with the deal. Still, banks continue to compete with luxury brands. More recently, luxury jeweller Tiffany & Co agreed to pay HK$5.7 million, or HK$1,500 per square foot, for its 3,800 sq ft ground-level shop at Times Square in Causeway Bay, says Colliers International.
Joe Lin, senior director of retail services at CBRE, however, said banks still found it difficult to top the spending power of luxury brands. "How can they compete with luxury brands that can afford to fork out HK$7 million to HK$8 million for prime retail shops?" he said.
Additional reporting by Kanis Li