Big fashion brands still looking to Hong Kong

Shop rents continue to rise but more slowly than before as retailers become more cautious about paying hefty sums for prime locations

PUBLISHED : Wednesday, 09 October, 2013, 12:00am
UPDATED : Wednesday, 09 October, 2013, 6:05am

Big international fashion retailers remain keen to open for business in Hong Kong even though shop rents are among the highest in the world.

Tommy Bahama, a United States-based causal wear brand, opened its first store in Hong Kong in January. Its store has a useable area of about 4,000 square feet and is located on the ground floor of the J Senses Building in Wan Chai.

"We are now trying to find further space in a mall on Hong Kong Island or in Kowloon for our second shop," said Terry Pillow, chief executive officer. The company had already explored the options available at IFC in Central, Elements above Kowloon station and Festival Walk in Kowloon Tong.

Since retail rents in the city were expensive, finding additional space was proving a "challenge", said Brian Pearce, the firm's managing director for Asia-Pacific. "Hong Kong retail rents are still rising, but not by that much, and a lot of people still want to come here."

Pearce said an additional incentive to opening a store in the city was that Hong Kong was "one of our stepping stones to mainland China", and it planned to expand into the mainland in two to three years.

Joe Lin, senior director of retail services at property consultant CBRE, said the firm continued to receive many inquiries from overseas retailers seeking to lease shops in Hong Kong, though international brands had grown cautious on rents over the past six months.

"If the shop is asking for a market rent, they are more ready to take it. But if the shop is asking for a 10 to 20 per cent premium on top of the market rent as happened one to two years ago, they won't accept it," he said.

Top-end retailers had become less active, he added, but mid-range international brands were now more active.

"This is because most luxury brands have already come to Hong Kong over the last three years."

Denis Ma On-ping, director of research at Jones Lang LaSalle for the Greater Pearl River Delta region, said as long as retail sales remained strong, retailers would be willing to offer higher rents for a shop in a prime location.

"But the growth in retail sales has slowed this year and retail rents have risen to a very high level. Retailers have therefore turned cautious on expansion, which has led to a slowdown in rental growth."

According to the firm, retail rents of high street shops rose 3.4 per cent from the end of 2012 to the end of the third quarter of 2013, well below the annual rental growth of 14.5 per cent recorded in 2012.

He forecast that rents would grow by 5 per cent this year, with demand shifting to locations outside core shopping areas.