It is no secret that Hong Kong property prices are one of the craziest in the world. This week's Capital Weekly comes with a very detailed article by 陳可思 that will definitely make your eyes pop out.
Hong Kong keeps its position as the world's second most expensive retail address, just after New York's 5th Avenue where the rents revolve around US$2,600 per square foot per year. Causeway Bay, namely Russell street, tops Hong Kong retail rents at above US$2,000 psf per year. Queen's Road Central in Central and Canton Road in Tsim Sha Tsui, cost an average of US$1,800 per square foot per year.
In Causeway Bay, average store rental prices have gone up by 200% since 2010. Cosmetics retailer Sasa has just signed a deal to rent a 2,600 square feet store in Causeway Bay Plaza including ground floor and basement for HK$300,000 per month. The current tenant is Walker Shop, who pays HK$190,000 monthly, which implies an increase in the rent of 58%. This deal at HK$115 per square foot per month is however considered "cheap" given the location of the store, where the market price in the ground floor is HK$500 more than what Sasa will pay.
The main argument of this article in Capital Weekly is pointing out that with these escalating prices, retailers are either pushed to move to the periphery or to the basements. Hang Seng Bank pays HK$113 psf per month to rent the basement in 52-54 Queen's Road Central. Should it be renting the ground floor of the same street, the price would not be lower than HK$1,000 psf per month.
Only the biggest brands are now bidding for leases in Hong Kong's premium locations. These brands view this a necessary investment given the Hong Kong awareness effect on the mainlanders. The most outrageous recent deal in the city is the one Zara just got to rent a 32,000 square feet (2,970 square meters) store in Central. This store is no other that H&M's flagship store in Hong Kong, in the Lane Crawford House. With this deal, H&M has just lost its flagship store to Spanish rival Zara, who will pay an astonishing HK$11M monthly. Yes, you read it right, eleven million Hong Kong dollars per month, or US$1.4 million. This is almost double the amount the Swedish chain pays for this rent since 2007. Zara will move into the store by the end of next year.
On a personal note, I'm so glad I got to read most of this article by myself! I remember during our university days when my Chinese was just elementary, I always asked J to read the Chinese financial publications such as Capital Weekly or iMoney for me... Now he still helps me out, but it's a whole different story :)