Lusting after luxury brands
Retail rental in Hong Kong is the most expensive in the Asia-Pacific region and among the priciest in the world, says Lucy Davis.
Beating off costly competition from Ginza and Brisbane, Hong Kong’s premier street-front rental in Central comes in at Number 1 in the Asia Pacific region at US$775 (HK$6,046) per square foot per year, according to a recent report by Colliers International. This makes it the seventh most expensive retail rental in the world, with New York’s Fifth Avenue, Paris’ Champs Elysees and London’s Bond Street taking first, second and third places respectively.
The reason for such bullish retail rents is simple: as with the city’s costly office and real-estate rentals, it all boils down to demand. There is fierce competition among retailers determined to rent desirable locations in key areas.
“The success of H&M [on Queen’s Road Central] has triggered a wave of newcomers entering Hong Kong. Many of these newcomers are overseas players who want to set up their first flagship stores in Central. Given the limited supply of retail space in Central, retail rents have been driven up,” confirms Simon Lo, director of research and advisory, Colliers International, who adds that he expects rents to increase by a further 3 percent to 4 percent this year.
A good example of this retail strategy is American luxury brand Coach, which opened its first global flagship store in the city at the intersection of Queen’s Road Central and D’Aguilar Street this May. The reason that the company chose Hong Kong is because it expects the China, Hong Kong and Macau premium handbag and accessories market to more than double by 2013 to above US$2.5 billion.
Meanwhile, on the other side of the water, luxury retailer Louis Vuitton opened its largest Asian store, and the biggest outside of Paris, on Canton Road this March.
“In addition to Central, Canton Road is another hotspot for luxury retailers to affirm their premier platform in Asia. International brands see Hong Kong as a showcase for building brand awareness and product knowledge among affluent mainland visitors, and it also represents a launch pad into the Chinese market,” explains Helen Mak, director of retail services, Colliers International.
Looking to the future, there is plenty of interest from other international luxury brands, which will ensure that retail rental remains high. Italian fashion brand Replay, for example, has recently affirmed its commitment to Hong Kong by announcing plans to open a further four stores in the city, and other international brands that are eyeing up Hong Kong include UK fashion store Top Shop, now with its own Kate Moss range.
High-end fashion retailers in particular continue to stakeout high-profile, high-traffic locations for better positioning of their brands. As a result, rents are expected to continue rising in both the short and medium term.
According to Lo, Hong Kong’s retail rental is set to soar even higher for two major reasons. “First, retailers can generate impressive sales from both the local market and the 24 million inbound visitors per annum. The second factor is always the lack of new space in prime locations.”
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