Foreign retailers, who previously bypassed Hong Kong when setting up their Greater China operations, are now moving to the city despite a shortage of options and high rents, property agents say. In the past two years, big international brands were reported to be setting up shop elsewhere on the mainland, citing the absence of well-located and reasonably priced retail space in Hong Kong. Now they are reviewing that strategy. One such case is Japanese dessert maker and retailer J-Sweets, which rolled out a Mochi Sweets outlet in Shanghai in late 2008. The outlet sells sweet glutinous rice. Having built up a chain of 40 outlets on the mainland, the firm decided it needed to expand into a more mature market like Hong Kong. In October, it opened its first Hong Kong store at the apm shopping centre in Kwun Tong, and more stores were planned despite high rents, said Cheng Kye-wai, the firm's co-owner. 'Rents here are much higher than on the mainland,' said Cheng, referring to the six-digit rent demanded for a 160 sq ft shop in the Tsim Sha Tsui MTR station. But the benefit of opening in a city that boasted higher disposable incomes was that prices could be higher to offset rents. Cheng expected a Hong Kong store to sell 2,000 desserts a day, at a cost of HK$10 each, compared with five yuan (HK$5.68) to seven yuan on the mainland. 'That's why we've come here. We see the potential for making a bigger profit,' he said. The firm was now planning to open four stores, in Tseung Kwan O, Kowloon Bay, Mong Kok and Kwai Fong, but would not be leasing street-level shops, he said. United States clothing retailer American Apparel also went directly to the mainland in 2008 and has opened one shop in Beijing and one in Shanghai. Now, according to property agents, the chain is looking for a 30,000 sqft space to open a flagship store in Hong Kong. Terence Chan, a director of the retail department at property consultancy Jones Lang LaSalle, said the monthly rent for a large street-level shop in a prime location could easily be between HK$5 million and HK$6 million a month. 'Having a flagship store in an international financial centre such as Hong Kong will be more like a brand-building exercise for them ... the problem is whether they can find the right space,' he said. Chan expected retail rents in Hong Kong to increase by as much as 10 per cent in prime locations this year given an overall improvement in the economy and stronger retail sales.