High Rents Causing Concern for HK Luxury Retailers

(IDEX Online News) – Forget Fifth Avenue or Rodeo Drive, luxury retailers with stores on Russell Street in Hong Kong are beginning to feel the pressure of the highest retail rents in the world.

According to a Bloomberg, retailers including Chow Tai Fook, Burberry Group and Kering SA (owner of the Gucci brand) are asking landlords to lower their rents on existing properties due to declining sales. Watch brand TAG Heuer has already closed its store on the prestigious shopping street citing high rents and declining traffic as the cause. Its former spot will be occupied by watch brand Rado.

The latest statistics from the Hong Kong Retail Management Association show that sales of jewelry, watches, clocks and valuable gifts sales fell 15.9 percent in the year ending June.

Part of the problem, reports Bloomberg, is the decline in luxury retail sales due to China’s economic slowdown and the country’s austerity and anti-corruption campaigns. These issues have been compounded by the weaker yen and euro, which means that Chinese tourists are looking to do their shopping in Japan or France rather than closer to home, according to Helen Mak, senior director of research at Colliers International.

Elsewhere in the city, landlords are apparently responding to the situation with a willingness to negotiate over rents. Bloomberg reports that Chow Tai Fook renewed its monthly lease at its Bank Center location on Nathan Road for HK$800,000 ($103,203), an almost 39 percent reduction.