Strong demand from international retailers and tight supply mean retail rents in Causeway Bay, Central and Tsim Sha Tsui are among the five most expensive shopping addresses in the world.
Research by property consultant Cushman & Wakefield showed average rent in Causeway Bay surged 34.9 per cent to US$2,630 - equal to HK$20,384 - per square foot a year for the 12 months to June. It overtook New York's Fifth Avenue as the most expensive retail destination in the world. It is the first time in 11 years that Fifth Avenue with an average rent of US$2,500 per square foot a year has not led the rankings.
Hong Kong's Central and Tsim Sha Tsui ranked the fourth and fifth-most expensive retail locations with an average rent of US$1,856 and US$1,547 per square foot a year respectively. New York's Times Square ranked third with an average rent of US$2,100 per square foot a year.
John Strachan, head of global retail services at the firm, said the retail rents of prime shops in Hong Kong jumped 21.8 per cent during the period. He believes strong growth in retail rents could be attributed to extremely active demand from new international retailers, expansion plans from existing brands and the very limited availability of retail shops.
"Indeed, notwithstanding slowing economic activity, retailers continued to see the market as the ideal launching platform into the mainland," Strachan said.
Luxury and mass-market fashion brands continue to vie for the best high-street locations, although retail sales growth slowed in the summer. That put upward pressure on rents, forcing mass-market retailers into secondary street stores or shopping centres. It meant mostly luxury watches and jewellery brands were able to afford the high rents demanded in premier locations.
However, the property consultant expects the impressive rental growth in Hong Kong will cool somewhat.
Michele Woo, senior director of retail transaction services at Cushman, said: "There has been a slowing in leasing activity in the past month as retailers adopt a wait-and-see approach towards year-end and the new mainland leadership confirmation after the 18th national congress."
She said Hong Kong would remain the ideal launching platform into the mainland for international retailers although "we are unlikely to see these very high levels of rental growth sustained".
Woo expects retail activity in Asia-Pacific will remain healthy as international retailers struggle to generate profitable trading in their own markets and need to look for expansion opportunities in the region.