Violent demonstrations in every weekend frighten the international brands companies.
Hong Kong Wen Wei Po (By Leong Yuet Kam)
The escalating of Sino-US trade war, the devaluation of the RMB and violent demonstrations of almost every weekend in recent months make visitors to Hong Kong sharply to drop and local consumption intentions to slump, and further frustrate Hong Kong retail market which had been weak at the beginning of this year, also many international brands, fashion brands and even jewelry brand chains begin to reorganize their branches development, with rent budget has been cut in half. Source points out that, the Italian brand PRADA intends to give up its store in Millenium Square, Russell Street, Causeway Bay in about 15,000 sq ft; While many restaurants and retail tenants in areas affected by violent demonstrations and road closures in recent months have also asked for rent reduction to owners to tide over the difficulties. Real estate insider believes that, the shop rent in core area fell by at least 10% in the second half of the year.
According to the statistics of Census and Statistics Department, the retail sales value in this June fell by 6.7% to HKD35.2 billion by year, far below market expectations of down by 1.9%. The sales value of jewelry, watches and precious gifts fell by 17.1% in terms of major categories, making luxury brands to readjust their shop opening strategies in Hong Kong.
PRADA plans to give up the shop in Russell Street.
Italian leather brand PRADA recently released its interim term performance as of the end of June this year, pointing out that the net sales in Greater China was down by 23% to EUR337 million being dragged by the contracted Hong Kong economy due to social unrest and currency fluctuations in Hong Kong.
Source points out that, PRADA has rent the shop on ground and the first floor plus with a small office upstairs in Millenium Square, Russell Street, Causeway Bay at about monthly HKD9 million since 2013, and the total area is about 15,000 sq ft with the sq ft rent at about HKD600, since the lease will expire this year, so the owner who also called “Toy King” Choi ChiMing recently recruits for rent at monthly HKD5 million, which is largely cut by 44% than the previous monthly rent of HKD9 million, also it means PRADA intends to give up the lease.
The rent budget of big brands is cut in Half.
Hong Kong economy is entering a recession due to the escalation of the Sino-US trade war and a series of violent demonstrations in Hong Kong, and consumption power is expected to continue to decline. It is understood that a number of fashion brands and even jewelry chain stores have restructured their shops opening strategies in Hong Kong, including drastically reducing the rent budget by at least half. Such as a famous fashion store in Tsim Sha Tsui who currently rents a branch for monthly HKD3 million will largely cut the rent budget by 60% to HKD1.2 million.
In fact, there has been rumor since last month that two flagship stores in Gala Place, Mong Kok and Hang Lung Center, Causeway Bay under the international fashion brand H&M have been recruited for rent for many months, and the ground floor to the third floor of Hang Lung Center among is 47,000 sq ft locating in Causeway Bay core retail area. H&M in advance rented the store for about HKD10 million in 2013 and opened it in late 2015, when it was the largest flagship store in the Asia region of the brand. In 2014, H&M again rented multi-storey shops in Gala Place, Mong Kok at monthly rent high up to HKD9 million, covering an area of 54,000 sq ft, and opened it in 2016.
On the other hand, a series of violent demonstrations have taken place in Hong Kong in recent months, which have blocked many shopping centers, such as Tsim Sha Tsui, Wan Chai, Causeway Bay, Central and Mongkok Nathan Road from time to time, affecting citizens and even tourists to consume in these areas, thus a large number of retail businesses have suffered a great blow, so tenants of restaurants, retailers and pharmacies etc. begin to ask the owner to reduce rent, also it is reported that some owners of the shops are discussing with the tenants.
Source points out that, as soon as there was a demonstration, Harcourt Road, Queensway would be closed, then the business of Taste Gourmet’s Pingyue Vietnamese cuisine branch in Far East Finance Centre had been affected, and they had three days in closures and only half-day business on the other 4 days during June and July. It is known that Taste Gourmet intends to request the help of owner Sino Group to tide over the difficult times.
Vacant possession Shops have been reduced in price and leased in succession.
The Managing Director of Midland Shops, Ho HonMing believes, Hong Kong economy is facing recession pressure and social movements are not known when to stop, making visitors to Hong Kong to reduce and local consumption to decline, thus the prospects for retail markets are uncertain, with some retailers expect future business volume to decrease by at least 30%, no longer as many years ago when all people willing to rush to rent shop even it is very expensive, also some investors are willing to reduce the rent or rent out for short-term of the shops that are in vacant possession for too long.
He believes that in the second half of this year, the rent of shops in shopping core areas fell by at least 10%, while the rent of shops in livelihood areas is expected to decline slightly, but it is estimated to fall by 5%.