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Retail Therapy
Hong Kong loves to shop, and that’s more important than ever
| Text : Elizabeth Kerr | Photo : Cato Sze |
It seems every time you step out of the MTR there’s a shopping mall where there wasn’t one a few months before. Ever since Times Square in Causeway Bay opened in the late-1980s, retail has been going up, up, up, and it shows no sign of stopping. Retail revenue and consumer spending are among the building blocks of an economy, and shopping by Mainland tourists has helped Causeway Bay, Russell Street in particular, position itself as the most expensive retail real estate in the world — pricier than any neighbourhood in London, Tokyo, Paris or New York.
There’s no doubt that retail property is one of the key market indicators in Hong Kong, but the Causeway Bay values are based on street level storefronts. Hong Kong barely has enough land for residential development, and prime office space is also becoming scarce in a city seeing rising demand. The only solution seems to be to go up.
Traditional shopping centres have been spread out in the old-fashioned way, like Festival Walk, Pacific Place, the Landmark and even the newer ifc and Elements. Langham Place, APM, K-11, The One, Megabox and iSquare are among the newest players in the retail game and there’s one thing that jumps out about all of them: they’re all in Kowloon.
An unscientific survey of shoppers in iSquare reveals as many types of shoppers as there are shopping centres. “I hate this place,” says a 27-year-old Hong Kong woman of her trip centre, which partially opened in late-2009. “I was in Harbour City looking for a gift for my mother, and I thought I’d try and see if there was anything here. Getting around is awful. The escalators are packed and you seem to go on forever. It makes me not want to shop. I prefer something like Cityplaza.” However, a few minutes later, a 40-something expatriate with two children in tow decrees, “It’s not that bad. We’re going to the cinema, so I was expecting a fight to get upstairs but it’s okay. And it’s connected right to the MTR. That’s handy.”
Cramming into an elevator to get to a jeweller is clearly not affecting retailing in general if crowds in any of the major centres around Christmas and on a Lunar New Year sale-season Saturday are to be believed. That’s good news for retailers who can expect rents to rise in the next year. Colliers International’s fourth quarter 2010 Hong Kong Market Report stated, “Supported by sustainable rising inflation, continued growth in retail sales and limited supply of shops in prime areas, retail rentals of ground floor units in traditional shopping districts will edge up further by 20% over the next 12 months.”
Joe Lin, senior director for retail services with CB Richard Ellis agrees with that prediction, and emphasises the lack of supply that’s influencing all sectors of the property market. Referring to the sudden swell in tall malls in Tsim Sha Tsui, Lin says, “Limited supply is a major factor and it’s driven up retail rents in TST in the last four years. Apart from Harbour City, no other malls opened in TST up to three years ago. That can explain why developers and landlords want more malls in the district.” As is the case on Russell Street, tourist foot traffic is key to retail rents and goes a long way to defining what constitutes a “prime” location. “Central is typically an office district. You can say Mongkok is a tourist destination, but for Lady’s Street or mass-market shops, not for international brand names. Cartier or Dior are not setting up in Mongkok,” he points out.
And it’s those luxury brand names that have driven the retail market to the place it currently sits. The foundations of TST’s position as a prime retail location can be traced back to the explosion of retailing on Canton Road. “One of the reasons Canton Road became so popular was Harbour City. You might agree that’s one of the biggest and most comprehensive shopping centres in town. A tourist can spend all day there with no need to go elsewhere,” explains Lin. Harbour City sits on top of the Star Ferry, cruise ships dock there almost daily, it’s got cinemas, restaurants, singular boutiques and high end brands shops alike … and it’s got a harbour view, a traditional sightseeing spot. “All these factors come together and make Canton a [prime] location.” Lin agrees that Mainland China’s relaxation of travel restrictions has led to increased rental rates that are a direct response to increased pedestrian traffic and subsequent retail activity. Russell’s boon came immediately after Times Square opened.
With so little ground space, vertical retailing is likely here to stay, and TST is one of few spots that can support new development — limited though it may be. “There isn’t enough land for new shopping centres and demand is high, so landlords are forced to build vertical. But they can’t draw the international brands in,” Lin says of one of tall shopping’s downside. There’s little on the horizon too. In Causeway Bay where there’s a serious supply issue, some major chains don’t even have a presence, such as H&M. “500 Hennessy Road could become a focus for major retailers,” theorises Lin of the upcoming Hysan redevelopment across from Sogo. “There haven’t been any new big malls in ten years in Causeway Bay, so retailers will like to hear about new projects.”
So where does that leave small- and medium-scale independents and local chains, and what does this mean for nearby residential property? For the former, it means high floor locations in prime centres or better locations off the beaten path. Those malls, like Megabox, demand big space users that can’t find suitable space in the core districts, like Jusco and Ikea. “These malls are destination shopping, where people go on the weekend.” Hong Kong is quickly becoming a city of two kinds of retail: high-end ground floor shopping and everything else higher up.
But residential buyers or renters need not fear a shiny new mall in their neighbourhood. “I think the impact could be positive for residents and office workers, who have more surrounding them all of a sudden,” says Lin, estimating the vertical retailing trend is likely to continue for 3-5 years. “And when the malls in TST do well, CWB landlords have to re-attract customers, so their neighbours benefit from that. Does it drive residential prices up? I don’t think so. I don’t it’s relevant to the situation.” He pauses briefly before throwing in a more personal potential influence. “Although some people may hate noisy foot traffic …”
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