DJI’s Causeway Bay store likely to be split into smaller units as landlord may struggle to find tenants for massive space

Phoenix Property has a better chance of finding tenants by splitting the space occupied by DJI across three levels at Tower 535 into multiple units, market observers say
Billionaire Francis Choi Chee Ming’s Early Light Group has still not found tenants for nearly 20,000 sq ft of space in Plaza 200 vacated by Prada in June 2020

DJI

Cheryl Arcibal

Published: 7:30am, 1 Sep 2021

Why you can trust SCMP

The landlord of a massive space vacated by DJI in Hong Kong’s popular shopping district of Causeway Bay is unlikely to find a single tenant amid the shift in the city’s retail landscape, but dividing it into smaller units can improve its chances several fold, said market observers.

DJI, the world’s largest maker of recreational drones, occupied some 10,318 sq ft spread over three levels at Tower 535 on Jaffe Road, owned by private equity real estate investment group Phoenix Property Investors. Together with two other vacant shops on the ground and first floors, some 18,784 sq ft of space is available for lease.

The first floor has an asking price of HK$150 per square foot (US$19) and HK$50 per square foot for the second floor space, they said.

Some other landlords with similar floor plates in the area once occupied by sole tenants have struggled to find takers despite agreeing to bring down rents sharply and split them into small units to accommodate the needs of different retailers.

A general view of Tower 535, located at 535 Jaffe Road, Causeway Bay. Photo: Martin Chan

“From the latest market sentiment, [the space] will probably take three to four months [to lease] with a reasonable market rental level and flexible layout,” said Kevin Lam, executive director and head of retail services at Cushman & Wakefield. He added that a smaller floor plate, especially a single-floor format, that can accommodate the different requirements of tenants would make it easier to lease the space.

Phoenix did not reply to an email requesting comment on the plans for the vacant space.

DJI closed its two-storey flagship store on August 16, citing the need to reflect on “the company’s and market’s evolving needs”. It marked one of the more recent withdrawals of retailers in Causeway Bay, which was once the world’s most expensive shopping district with the top average rent, as retail sales in Hong Kong took a beating following the street protests of 2019 and the coronavirus pandemic lockdowns that followed last year. Affordable fashion retailer Forever 21 and lingerie giant Victoria’s Secret were among the brands that initially abandoned their Causeway Bay locations and then eventually exited the city altogether.

While details of DJI’s lease are not available, spaces on Jaffe Road were leased for HK$212 to HK$422 per sq ft in 2016, the same year the company opened its store, according to information posted on property agency’s Midland IC&I website.

“The Hong Kong retail landscape has changed over the past few years, from retailers targeting prominent locations for big flagship stores to what is now regular sized boutiques,” said Lawrence Wan, head of advisory and transaction services for retail at CBRE.

Causeway Bay, in particular, has seen a shift in retail offerings. Supermarkets, fast fashion and restaurants are taking over spaces from traditional luxury brands in the trendy shopping district. Recently hamburger joint Five Guys took up 6,700 sq ft on Russell Street that was formerly occupied by cosmetics retailer Sa Sa.

However, 20,000 sq ft at Plaza 2000 next door, formerly occupied by Italian fashion brand Prada, has found no takers despite the generous offer of landlord Early Light Group, owned by billionaire Francis Choi Chee Ming, to cut rents steeply. The owner’s move to subdivide the space spread over four levels into multiple units has still not borne fruit.

The landlord was willing to lease 5,042 sq ft on the second floor for about HK$61 per sq ft in March, the Post reported.

“Since the border is closed due to Covid-19, both landlords and retailers have realised the importance of maintaining a good balance of local and tourist consumption in their portfolio,” Wan said. “Local consumption is the foundation for stable sales, while tourist consumption is the icing on top, especially during economic growth.”

Most market observers expect F&B operators to lease the Tower 535 space as they are driving deals in Causeway, but they are not ruling out other categories such as supermarket operators.

In Causeway Bay, “the F&B sector is still and will be the major leasing momentum,” said Thomas Chan, research analyst at Midland IC&I.

Post