Increasing retail vibrancy in Hong Kong

June 7, 2012 / By

From time to time, I hear people complaining about the repetitive tenant mix found in Hong Kong. I personally disagree with it and indeed, I think we are seeing more and more variety these days as more new brands enter Hong Kong and as retailers develop secondary lines to expand their market size.

In the current year to May, at least 17 new international fashion, jewellery and watch brands opened their first stores in Hong Kong. This means that, on average, we can find at least three to four new international branded stores every month. And this is on top of new local brands and new brands of other retail trades.

Examples of international brands opening their first stores in Hong Kong, YTD 2012

I believe that this trend will continue as retailers from around the world see Hong Kong as a gateway to the Chinese market. The second half of 2012 will see a few more international brands opening their first stores in Hong Kong, such as Abercrombie and Fitch, COS and Tommy Bahama.

Such an aggressive influx of international brands has intensified the level of retail space competition and forced some of the less affordable local brands out of their original spots. Landlords are happy, of course, as this means higher rental incomes and capital values for their premises. It may be emotionally sad to see some traditional stores disappear; however, the keen competition does add vibrancy to Hong Kong’s retail landscape. For example, we increasingly see brands spanning over to secondary streets in the peripherals of core shopping locations or large-scale shopping centres in non-core locations, and landlords are keen to rejuvenate their shopping centres.

Furthermore, the buoyant demand increasingly makes “Ginza Type” commercial developments in core locations an attractive and affordable option for certain retail trades. Primarily dominated by restaurants and health & beauty tenants, Ginza Type developments are increasingly popular and have a more diversified tenant mix. This gives them the potential to capture the shopper traffic attracted by the nearby street shops and prime shopping centres, yet their rents are much lower. Currently, average rents of upstairs retail space in core locations range from about HKD 30-60 per sq ft per month. This compares with an average of about HKD 450-800 per sq ft per month for high street shops in core locations. Furthermore, the trade clustering advantage and the potential to adopt centralised marketing campaigns also ensure that the right group of shoppers is attracted to this type of development.

While the future supply of purpose-built retail space will remain tight in Hong Kong, the development of Ginza Type commercial schemes are set to give some extra options to tenants as well as consumers. Over the next 12 months a number of Ginza Type commercial developments will come on stream, such as 18 Mody Road in Tsim Sha Tsui, 1-29 Tang Lung Street in Causeway Bay, and New California Tower in Central. I look forward to experiencing a more diversified and interesting shopping experience these new changes and these new brands will bring to Hong Kong.


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