Relocation of top luxury brands’ regional headquarters to China likely to weigh further on Hong Kong office rents

Many luxury retailers are looking to shift their regional operations to China to be close to their main growth market

Grade A office rents to decline by 5 to 10 per cent this year, after falling 17 per cent in 2020, says Savills

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Shanghai in China is emerging as the preferred location for the regional headquarters of luxury fashion retailers. Photo: Xinhua

Published: 8:30am, 7 Jan 2021Updated: 10:57pm, 7 Jan 2021

Some luxury retailers are considering relocating their regional headquarters to China from Hong Kong to be close to their major growth market, which could add further pressure on office rents in the city, according to market observers.

Brands including Versace, Salvatore Ferragamo, and LVMH-owned Bulgari, Fendi, Givenchy and Celine reduced headcounts in their Hong Kong headquarters last year and shifted more resources to mainland China, according to market sources.

Beauty conglomerate L’Oréal is also planning to downsize its Hong Kong regional office and move positions to China and Singapore, while French shoe brand Ash will move its operations to Shanghai, the sources said. A few others are waiting for border restrictions to ease, they added.

A lot of the big luxury brands are seriously pondering the issue, according to Simon Smith, senior director of research and consultancy at Savills. “Should they be closer to their biggest emerging market? Or should they remain, as they have done traditionally, in Hong Kong? I think a lot of them are looking to China, particularly Shanghai,” he said.

China is increasingly accounting for a greater share of sales and profits for big fashion brands, as the mainland’s economy continues its steady recovery from the Covid-19 pandemic. Retailers are also benefiting from China’s dual-circulation strategy that places a greater focus on domestic consumption. Hong Kong’s economy, meanwhile, has struggled from the months-long social unrest from the second half of 2019 and compounded by the Covid-19 pandemic.

Luxury retailers are considering moving their regional operations to China from Hong Kong. Photo: Shutterstock

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