Hong Kong’s retail landlords bank on emerging concepts like art exhibitions, delivery-only kitchens to lease vacant shops

The landlord of a 14,000 sq ft commercial space in Central has been renting the shop on a short-term basis since British high street retailer Topshop moved out
Deliveroo plans to open more of its Deliveroo Editions delivery-only kitchens amid huge interest from its restaurant partners

Retailing

Sandy Li

Published: 7:30am, 5 Oct 2021

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Hong Kong’s retail landscape is undergoing a massive change, as art exhibitors and delivery-only kitchens help landlords fill up empty space in the city, which until recently had the world’s highest commercial real-estate rents.

“Landlords are more willing to accept new concepts as they need to shift their strategy to tap local demand,” said Helen Mak, senior director and head of retail services at Knight Frank.

While the retail sector is struggling to recover from its worst downturn on record, many international brands such as Topshop, Gap and Prada having either exited or scaled down their operations in the city as they were pummelled by the political unrest in 2019 and later by the Covid-19 pandemic.

Shopping centre rents in the second quarter of this year had declined 10.2 per cent year on year and 45.2 per cent from a peak three years ago, according to Savills.

A Digital Art Fair is being held at 59 Queen’s Road, Central, the site of British high street retailer Topshop’s former flagship store. Photo: Jonathan Wong

In Central, the landlord of a 14,000 square feet store on the bustling Queen’s Road has been offering the space on short-term leases, after the British high street retailer Topshop closed its last and largest store in Hong Kong in October last year.

Last week, the two-storey store was rented out to Digital Art Fair through Knight Frank, which is currently holding its first ever physical and virtual art fair in the city. The exhibition features a 360-degree immersive experience and non-fungible token (NFT) digital art. Some 200 digital and NFT artworks are available for sale, which can be bought either with currency or cryptocurrencies up to October 17.

“Art and culture will become a new retail trend,” said Mak.

Retail landlords are also getting help from unexpected quarters. Video bloggers who promoted different skincare brands on Instagram before developing their own formulas, have opened physical outlets after successfully converting their followers to sales.

“Little Stardust” and “Woke Up Like This” opened stores at Times Square, while “I Never Use Foundation Breakfast Club” opened an outlet at Landmark.

Delivery-only kitchens, which allow restaurants to operate off-site “ghost kitchens” that handle only delivery orders to cater to a larger customer base across the city, were another emerging leasing trend.

Food delivery app Deliveroo’s delivery-only kitchen, called Deliveroo Editions, has expanded to six locations since it was launched in 2017. It charges its restaurant partners a commission per order who can use the space for their delivery-order business.

Currently, Deliveroo has six Editions sites in Wan Chai, Sai Ying Pun, Quarry Bay, Kowloon Bay, Tuen Mun and Kwai Tsing, with the company planning to invest millions of dollars more to expand to eight locations this year as it has received a huge interest from its partners.

“Deliveroo invests upfront in the Editions kitchens. This further helps restaurants as they can expand with lower risk in addition to taking very little capital risk,” it said in a written reply to the Post.

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Dennis Lau, president of Wing Nin Group, which operates four noodle shops, has rented two sites at Deliveroo Editions in Tuen Mun and Kwai Chung.

“We will add a third at Deliveroo Editions’ Kowloon Bay site this month to expand our delivery business,” he said. “This has helped us to expand in areas where we do not have shops with a low starting cost, as we do not have to invest in infrastructure, which can cost about HK$1,000 per square foot. Instead, we only pay commission to Deliveroo Editions.”

JLL said food delivery companies were currently in an aggressive expansion mode.

“They are looking for 5,000 to 6,000 sq ft ground-level shop spaces in densely populated districts,” said Oliver Tong, head of retail at JLL in Hong Kong.

This article appeared in the South China Morning Post print edition as: Art fairs and kitchens help fill empty spaces