British beauty retailer Lush has shut its five-storey shop in Hong Kong’s Central district, becoming the latest global company to succumb to a coronavirus -induced economic slowdown and, in turn, piling pressure on the city’s souring retail property sector. The company, which is famous for its fresh handmade soaps, masks and shampoos, also had a spa on the top three floors on Lyndhurst Terrace. Its five-year lease for the store, which covered about 7,000 sq ft, was expiring at the end of August. Lush secured the space for HK$1.25 million (US$161,289) and its rent this year was HK$1.52 million, according to Land Registry documents. Sources close to the matter said that the landlord was looking for new takers, but had not found any so far. The retailer joins a list of companies reducing their footprint in the city, having been stung by the coronavirus outbreak and Hong Kong’s anti-government protests before that. Gap said last week it was closing five of its eight stores in the city, while lingerie maker Victoria’s Secret shut its flagship store last month, seven years before its lease was to run out. Earlier in June, Greek jeweller Folli Follie shut all of its shops , while Munich-based luxury brand MCM said it was closing three stores, including a flagship store in Central, out of a total of five by the end of April. “In Hong Kong, the playbook has changed,” said Helen Mak, senior director and head of retail services at consultancy Knight Frank. “You might need 10 stores to host 60 million tourists a year, but now the fact is that you only have seven million locals to serve, and no more than three stores will do. Every retail brand, with no exception, will shut its stores.” Hong Kong’s retail sales fell 32.8 per cent year on year in May, which was the 16th consecutive month of decline. The city, meanwhile, remains the world’s most expensive property market. Lush reported an operating loss of £4 million (US$4.99 million) for 2018-2019, and founder Mark Constantine recently warned of a further decline for the past year because of the pandemic. The company was being sued by MTR Corporation, which operates Hong Kong’s railway system and is also a major property developer and landlord, for the non-payment of rent, management fees and other levies since February for its store in Telford Plaza. The amount it owed totalled HK$1.1 million. Victoria’s Secret closes Hong Kong flagship store as Covid-19 upends tourism Lush was also being sued by the landlord of its Lockhart Road store for failing to pay HK$780,000. In May, however, it said it had cleared both amounts and that writs for unpaid rents against it had been withdrawn. “The reality for Hong Kong businesses is that the majority of costs go towards rent. Without support on this and with greatly reduced income, it is not hard to explain why retailers, restaurateurs, etc find themselves in difficult circumstances,” Lush said in May. “We have been engaging with all landlords to talk about rental reductions and payment plans for months. This isn’t the time for one party to take all and for one party to be left with all the burden. We believe there is collective social responsibility … to ensure retail survives in Hong Kong.” The UK retailer added that its landlord in Lockhart Road had given it a slight discount on rent, following negotiations. However, this was “not reflective of the reality we are facing”, it added. Emperor of Hong Kong’s Russell Street reports US$464.5 million loss Inditex, which owns Zara, Zara Home, Bershka, Pull&Bear and Massimo Dutti, and has 25 stores in Hong Kong, said in June it will close up to 1,200 stores globally. “We are reviewing whether to shut some shops with old facilities and low efficiency, or to renovate them,” an Inditex spokeswoman said, adding that the company did not yet have a concrete plan about how its shops in Hong Kong would be affected. “We are talking to some landlords in Hong Kong about renewing leases for those close to expiring. In such an environment, it makes no sense to maintain a shop if the landlord is asking for more. It is no secret that retail has been extremely tough in the past year. For example, our stores in prime [Hong Kong] shopping malls, including IFC, Harbour City and Times Square, have basically seen no traffic in the past couple of months – and it is not just us,” the spokeswoman added. Prada and Tissot call it a day on world’s most expensive shopping street H&M, another fast-fashion player, also said in June it was shutting 170 stores globally. While more retailers are expected to scale down their business in the city, the decision to surrender their leases prematurely can be difficult because of the need to compensate landlords, according to Oliver Tong, head of retail at property services firm JLL in Hong Kong. “What they usually do is look for new tenants while asking for lowered rents, and wait for leases to expire,” he said. “At this moment, it is very likely these retailers will not renew leases when it is close to the end.”