Tiny store in Causeway Bay shopping district sells for record price

A tiny Causeway Bay shop has become the most expensive commercial property after it was sold for a record HK$1.38 million per square foot.

The 130-square-foot shop on 77-83 Matheson Street changed hands at HK$180 million, with no information yet on the identity of the buyer.

Its unit price surpasses the previous record of an East Point Road shop, also in Causeway Bay, which was sold last year for HK$233 million, or HK$932,000 per square foot.

Property agents said CSI Properties chairman Mico Chung Cho-yee or a related party was the buyer. "I didn't buy the shop. It's my friend," Chung said, without elaborating.

The deal surprised the market. Agents said the buyer could generate a rental yield of only about 1.5 per cent from the property at current rates as retail rents might have peaked. Factoring in the double stamp duty, the total investment for the buyer is about HK$193 million.

The shop is leased to a seller of audiovisual products for HK$180,000 a month.

According to property agents, the shop could command a rent of HK$300,000 a month when the current lease expires this year. Even then, the rental yield would be only about 2 per cent.

Chung said: "Most of the prime investment properties can offer a yield of only 2 per cent. It doesn't matter how big the shop is. The main thing is the width of the shop front, which is 9 feet.

"In addition, the retail market is still good. We have a number of properties in Causeway Bay. Retail sales remain strong."

Chung is among the most active property investors in the city. In recent years, his company has been more aggressive in property development. CSI teamed up with four other developers, including New World Development, to tender for three sites in Kai Tak last month.

Chung's last personal investment in the property market was a shop acquisition in Mong Kok for HK$567 million in February last year, when he teamed up with another investor.

A source said Chung was looking for more investment properties in first-tier locations.

Joe Lin, a senior director of retail services at property consultancy CBRE, said whoever bought the Matheson Street shop was banking on a significant growth in rent and capital value as it was close to Times Square, the preferred shopping destination of mainland tourists.

"Shopper traffic may increase if the new renovated shopping arcade in nearby Lee Theatre Plaza catches on. That could boost rental growth," he said.

In the short term, Lin said retail rents would be flat.

One property agent, who declined to be named, said the buyer overpaid for the shop. "It's close to Times Square. But it's different from Russell Street, which is also near Times Square but is busy with pedestrians. The shop is also too small, which limits the choice of tenants and limits rental growth."

He said the buyer was willing to pay the record-breaking price because the minimum price of a shop on Russell Street was HK$300 million.

"The price of the shop is less than HK$200 million but there aren't too many shopowners on Russell Street or Matheson Street willing to sell. So you have to pay a premium for shops near Times Square," he said.