Stuck with 20,000 sq ft of prime space on Russell Street, Hong Kong landlord splits it into smaller chunks to find tenants
- The owner of 20,000 sq ft of space in Plaza 2000 is partitioning the ground floor into four units, the smallest of which is 148 sq ft
- The landlord is asking for HK$310,000 per month, or HK$61 per sq ft, for a 5,042 sq ft space on the second floor, the lowest since the early 2000s, sources say
A Hong Kong landlord, unable to find a tenant for a large space in one of the world’s most expensive shopping districts, is splitting it into smaller units in a bid to lease them out since losing Prada in June last year. And one of the units is 40 per cent cheaper than a similar space leased less than a week ago in the next building.
The owner is asking for HK$310,000 (US$40,000) per month for a 5,042 sq ft space on the second floor, or about HK$61 per sq ft, a level that reflects the cheapening of the Causeway Bay retail market after months of social unrest and the Covid-19 pandemic triggered an unprecedented slump in the city’s retail and tourism industries.
“It is the cheapest rent along the street that I can recall of in the past 20 years,” said Michael Chik, managing director of Sheraton Valuers, who has been involved in the industry for more than 40 years. His firm specialises in leasing of commercial properties.
Choi could not be reached for comment. He did not reply to phone messages left with his office.
Last week, the Post reported that the American burger chain Five Guys would lease 6,700 sq ft on the first floor of Emperor Watch and Jewellery Centre, also on Russell Street, for HK$670,000 a month, or HK$100 per sq ft.
Chik attributed the higher rent for the first floor of Emperor Watch and Jewellery Centre to independent staircase with direct street access.
Hong Kong retail sales plunged by a record 24.3 per cent year on year in 2020, according to government statistics, as the pandemic and the ensuing economic recession dampened consumer sentiment. A slump in tourist arrivals, which tumbled 94 per cent to 3.6 million, made matters worse.
Among Choi’s property in Plaza 2000, the most expensive lot is a 2,100 sq ft unit on the ground floor for which the landlord expects to obtain HK$2 million a month, or HK$952 per sq ft. Another lot, a combination of 788 sq ft on the ground floor and 4,958 sq ft unit on the first floor, will be offered at HK$850,000 per month, or HK$148 per sq ft. The smallest lot of 148 sq ft located on the ground floor is said to be marketed at HK$100,000 a month.
“It will take time for the landlord to find tenants for the more expensive units, but the HK$60 per sq ft space should be affordable for F&B operators,” said Barrie Chan, deputy senior director at Savills.
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Prada paid HK$9 million a month, or HK$450 per sq ft. The landlord could generate about HK$5.3 million if all four levels are leased out at the indicative asking prices. Choi had agreed to cut the rent there by 44 per cent to HK$5 million but the space has been vacant since.
Next door, at 22-24 Russell Street, a four-level building covering 8,740 sq ft previously leased to La Perla is also seeking a new occupier. The entire space was previously occupied by French watch brand Sennet Freres.
La Perla signed a five-year lease in 2015 for HK$7.5 million a month, or HK$858 per sq ft. The two parties later agreed to a reduce it to HK$5 million from April 2017 to April 2018.
Emperor International did not reply to inquiries regarding rent from the Post.
“Even though retails rents on Russell Street have dropped by half from the peak in 2018, international brands will only return when the tourists come back,” said Savills’ Chan.
