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  • Apr 17, 2014
  • Updated: 5:40pm
PropertyHong Kong & China
RETAILING

Empty shops on the up in Causeway Bay as high rent drives out business

Only luxury brands or jewellery shops are able to afford the rents that landlords are asking for, according to property consultancy CBRE

PUBLISHED : Wednesday, 15 January, 2014, 5:33am
UPDATED : Wednesday, 15 January, 2014, 9:51am

Causeway Bay continued to lure its share of shoppers over Christmas and the New Year, but beneath the lights and decorations all was not well for Hong Kong retailers.

Data from the Hong Kong Tourism Board shows visitor arrivals in Hong Kong continue to increase. In November alone there were 4.58 million visitors to the city, up 8.6 per cent year on year. It is a safe bet that a fair number of those visitors made their way to Causeway Bay and other shopping precincts.

But, despite the traffic, an increasing number of shops in areas such as Causeway Bay and Tsim Sha Tsui were vacant or were occupied on short-term leases over the holiday season.

A spot check by the South China Morning Post showed that nine of the 53 street-level stores in Percival Street in Causeway Bay are vacant or being leased on short-term contracts, despite the street's proximity to Times Square and Russell Street, the most expensive shopping street in the world.

The vacancy problem is even more serious on Foo Ming Street, where half of its 10 shops are vacant or leased on short-term contracts. Pak Sha Road and Lee Garden Road are in a similar situation.

"Vacancy rates have increased since the fourth quarter of 2013 and it's particularly obvious on second-tier shopping streets," said Joe Lin, senior director of retail services at property consultancy CBRE. Top-tier shopping streets did not have the same problem, he added.

Vacancies were also to be found in Tsim Sha Tsui's Cameron Road and Carnarvon Road, he said, but the problem was most acute in Causeway Bay, where rents have risen sharply over the last few years.

"The shops are vacant because owners are being aggressive about achieving higher rents that only luxury brands or jewellery shops are able to afford," Lin said.

"Previously, when retail sales were growing strongly, luxury brands might have considered renting a shop there. But they have slowed their expansion now and would consider expanding only in the most prime locations."

Kenneth Yau, senior district sales director at agency Centaline, said in recent months some shop owners had been willing to accept lower rents in order to secure tenants.

"Initially they were not willing to cut asking rents for shops on Hong Kong Island. Then, after hard bargaining, they lowered their rents 20 to 30 per cent, but even this did not secure tenants. Now there are more shops standing empty, which has increased the bargaining power of tenants."

Lease renewals, which once resulted in rent increases of up to 80 per cent, were now leading to more modest increases, of 20 to 25 per cent, CBRE found in a survey.

"We believe rents of second-tier shopping streets will drop more than 10 per cent this year, while rents in top-tier locations will stay firm or rise by only about 5 per cent," Lin said.

As long as landlords keep to such adjustments of rents, vacancy rates could fall in the second quarter of this year, he said.

"Retailers focused on selling mid-range products will be more active this year, as mainland tourists have adjusted their spending habits to buy these kinds of products," he said.

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omnimus
Supply and demand, yes, but it's not a heavy path!
And for now, we do have to live with the fact. I have been thinking for a year how to open my own store, solution: buy your own shop but you can't do that until you made some money first, actually a lot first in HK's case!
I don't think rent will come down too much even if it does. There are too many companies from overseas queuing for prime locations. The mainland market will remain attractive for a long time to come.
Dao-Phooy
A walk along the Golden Mile to TST yesterday was thoroughly depressing. The eclectic mix of shops has all but disappeared because greedy landlords are asking for ridiculous rents. Jewelry and watch shops sit next to one another, block after block on both sides of the road. Canton Road is full of so-called high end shops - some even with queues of Mainlanders waiting to enter their hallowed portals. The shopping experience for us who are not tourists or rich Tai-tais in our home town is simply BORING! The fact is that HK is no longer a shoppers' paradise because virtually the only offerings are the tawdry goods in the Ladies' market or over-priced luxury goods. Shopping malls are also boring because they are full of 'chain' shops which are the only ones which can afford to pay the huge rents demanded by the greedy, greedy landlords. Personally, I hope your shops remain empty until you feel economic pain so that rents can come down and hopefully allow young entrepreneurs to start small businesses and restore some of HK's former vitality in the not too distant future.
HK_eh!
supply & demand. that's all it is. deal with it unless you want urban planning /sic
mdap
Rents in HK will drop dramatically in the next few years, when shops such as LV in Nathan Rd are experiencing 80% drop in customer sales and luxury watch shops have gone from selling 200 pieces a month to 5, then only one thing can happen - they will start closing shops. Greedy HK landlord's will soon find themselves begging for tenants ...

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