Global brands moving into Hong Kong's rural shopping malls in search of customers

Weakening sales and high rents in the core districts are driving retailers and restaurant operators to shopping centres in the New Territories

PUBLISHED : Tuesday, 12 August, 2014, 3:27pm
UPDATED : Wednesday, 13 August, 2014, 9:39am

Weakening retail sales and high rents at second-tier streets in core shopping districts have led major brands to look for shops at regional malls instead.

"Large retailers and restaurant operators are increasingly interested in leasing shops in V City [a one-year-old shopping mall in Tuen Mun]," said Evelyn Suen, assistant general manager of leasing at Sun Hung Kai Real Estate Agency, a subsidiary of Sun Hung Kai Properties.

Maureen Fung Sau-yim, general manager of SHKP's leasing department, said international fashion brand H&M leased a 20,000 sqft duplex store at the Tai Po Mega Mall recently. It will be the largest H&M shop in the northeast New Territories when it opens at the end of the year.

"Large lifestyle brands such as H&M and Uniqlo are interested in expanding in regional malls," Fung said. "The population in the districts is enough to support regional malls with a gross floor area of between 300,000 and 600,000 sqft. Regional shopping malls are comparable in turnover and shopper traffic to the shops in Tsim Sha Tsui."

Fung said the retailers were interested in malls along the railway in the New Territories, such as Yuen Long Plaza.

Suen said food and beverage operators were the most active in seeking shops at regional malls.

"Since the retail rent in the core shopping areas is high, the food and beverage operators have to bear higher investment risk," she said. "But the operating cost in regional shopping malls would be lower and the shopper traffic is high, which has attracted many operators to open restaurants there."

With a population of 1 million in Tuen Mun and Yuen Long, there is a large customer base for V City.

"Many residents have repaid their entire mortgage loans. They have strong spending power," Suen said.

Fung found that major brands were hesitant to open shops in regional malls two years ago. "But they have changed," she said. "I brought some retailers to visit the shopping malls in Yuen Long and Sheung Shui a few weeks ago. They were surprised by the busy shopper traffic. It is now easier to promote the regional malls to them."

She said the regional shopping malls under her management were able to maintain a healthy retail-rent-sales ratio of 15 to 20 per cent. The ratio determines if the shop makes economic sense to lease.

A lack of large retail space in the four major shopping districts has also driven retailers to look for shops in other districts.

Fung said international brands were usually looking for retail space of more than 10,000 sqft.

"They require a bigger retail shop than local retailers. But it is very difficult for them to find a shop with more than 10,000 sqft in the four major shopping districts. They have to look for space in a regional shopping mall," she said.

Michele Woo, executive director for retail at consultancy Cushman & Wakefield, said: "Some retailers have turned cautious in leasing because the growth of retail sales has slowed in recent months.

"They would rather expand in shopping malls in Sheung Shui and Tuen Mun than in second or third-tier shopping streets in core districts. They have found that it is more profitable to rent a shop in the new towns."