Causeway Bay’s Russell Street signals deflation and the end of a heady era
Glittering watches and necklaces are disappearing from one iconic Hong Kong shopping street as the city witnesses a continuing drop in mainland tourists, a new research report showed.
Russell Street in Causeway Bay, until a few years ago the world’s most expensive retail strip, has seen the presence of luxury watch and jewellery shops drop more than 20 per cent in the past two years, according to a report by property consultancy JLL.
Watch and jewellery brands occupied about 43 per cent of the shops in December, compared with 67 per cent in 2014, the report said. Their places have mostly been filled with fashion and cosmetics brands.
Hong Kong used to be a favourite destination for mainland shoppers. In 2012, Russell Street, with an average annual rent of US$2,800 per square foot, surpassed Fifth Avenue in New York as the world’s most expensive shopping strip, according to a report by Cushman & Wakefield.
Since 2014, retail sales have dwindled amid a series of pro-democracy protests, Beijing’s anti-corruption campaign and the appreciation of Hong Kong’s US-dollar linked currency.
Hong Kong retail sales were down 5.5 per cent year-on-year in November, the 21st straight month of declines, according to the latest government data. Jewellery, watches, clocks and valuable gifts suffered a 14.4 per cent fall in sales.
“Shops that were commanding rents as high as HK$2,500 per sq ft just two years ago can be leased today for HK$1,000 per sq ft,” said Denis Ma, head of research at JLL.
Joe Lin, executive director at property consultant CBRE, said he expects a moderate 5 per cent fall for rents of prime shopping locations in 2017.
“Most vacancies have been filled, which means the rent has dropped to a level acceptable to the market,” Lin said.
Among sectors likely to benefit from the current trend, cosmetics were still popular with middle-class tourists, while fashion and food sellers would target the local market, Lin said.
Retailers are now trying to lure customers with unique in-store experiences, with Adidas adding a virtual reality fitting room to its Causeway Bay store and Nike offering a treadmill for shoppers, according to the JLL report.
“Lower rents and opportunities to secure shops in prime retailing locations has opened up the market to a new range of retailers that were previously overlooked, such as cinemas and even cooking studios,” Ma said.