The average rent of street-level shops on Russell Street has surpassed Fifth Avenue in New York, making it the most expensive shopping street in the world, the latest research shows.
According to property consultant Cushman & Wakefield, the average retail rent in the Causeway Bay street grew more than 13 per cent to US$2,800 per square foot a year in the second quarter. That was higher than the US$2,500 per square foot at Fifth Avenue.
"It is the first time rent at Russell Street has been higher than that in Fifth Avenue. In the first quarter, the annual rent was US$2,471 per square foot, less than US$2,500 at Fifth Avenue," said Sigrid Zialcita, a managing director of research services at the firm. "It means the retailers are willing to pay higher rent for a store in Hong Kong.
"You [international retailers] have to be here [Hong Kong] if you want to do business."
The strong performance of Hong Kong retail rents was due to the influx of mainland tourists, a solid consumer base on the back of wage gains and low unemployment rate and limited supply of retail space, Zialcita said.
Thanks to the aggressive expansion of international retailers, the firm said rental rates in prime shopping centres in Hong Kong were more than US$927 per square foot a year in the second quarter.
Argentina ranked second with rents of US$500 per square foot a year. Beijing was third with US$404 while Shanghai was sixth with US$368.
Michele Woo, a senior director of retail at Cushman, said international brands continued to expand in Hong Kong. "For example, Tiffany leased a 3,800 sq ft shop, which used to be a cinema at Times Square in Causeway Bay, while Burberry leased a 7,000 sq ft store in Russell Street," she said.
Monthly retail rents in Causeway Bay surged 18 per cent to HK$2,000 per square foot in the third quarter, compared with the second quarter. The rent is 54 per cent higher than a year ago. Central's retail rents grew 25 per cent to HK$1,500 per square foot a month, while rents in Tsim Sha Tsui climbed 30 per cent.
International brands such as Burberry have posted disappointing results recently and as the economies of Europe and United States remain in poor shape, they have had to focus on developments outside their home markets, in particular the mainland market.
"Hong Kong, with the stable local consumption, is a good platform for them to do business," Woo said. "But they may cut their budget from opening three or five new stores to one store only."