Rising vacancy, sliding rents in Hong Kong signal cracks in world’s most expensive retail strip to persist into new year

Landlords and retailers on Russell Street are facing a tough ending to the year as vacancy jumps, sales slump, analysts say

Shops vacated by global brands may be tenanted by new players that count on local consumers instead of tourist dollars, devaluing rent premium

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Pedestrians walk past closed stores on Russell Street in the Causeway Bay, Hong Kong. The Covid-19 pandemic has slammed tourist arrivals and retail sales for almost two years. Photo: Bloomberg

Published: 8:30am, 10 Sep 2020Updated: 2:38pm, 10 Sep 2020

The world’s most expensive retail strip is likely to endure another six months of industry slump as shop owners struggle to replace premium tenants amid Hong Kong’s deepening recession.

Global brands from Prada to Rolex and Victoria’s Secret have in the past year vacated their space near or along Russell Street in Causeway Bay – whose rents exceeded those in New York, London or Paris at the peak of the cycle – as the economy suffered from political upheavals and public health crisis.

“The market has not seen the bottom yet. I think the worst will only come at year-end,” said Edwin Lee, founder and chief executive of Bridgeway Prime Shop Fund Management, which owns 18 street shops across the city. “People expect the [Covid-19] vaccine to be ready and available by early or the middle of next year, when confidence is expected to recover.”

Those vacant shops could end up being absorbed by mass market fashion stores or supermarket chains, potentially devaluing rent premium, he added. The pandemic and dwindling tourist arrivals have been a major blow and local consumers alone could no longer support big brands, he added.

Hong Kong’s economy has contracted in the past four straight quarters, marking its worst recession on record. The Covid-19 pandemic since January, as well as months of social unrest last year, have choked tourism and undermined the government’s efforts to revive activity.