Hong Kong rents rivaling 5th Avenue chase retailers away
By Alex Frew McMillan and Charmian Kok
HONG KONG/SINGAPORE (Reuters) - Hong Kong's main shopping district is gaining on New York's 5th Avenue for the title of world's most expensive retail zone as rents rise by 35 percent a year, pushing chains such as H&M out to the cheaper suburbs.
Swedish fashion chain Hennes & Mauritz's first store in Asia was a 30,000 sq ft (2,800 Sq m) flagship in Central, the heart of Hong Kong. But with the lease up for renewal and the rent set to double, the world's second-largest clothing retailer will close the location next year and seek new store space elsewhere.
Space has always been at a premium in Hong Kong, an island-city, like Manhattan, where developers plant high-rises on every available inch. Retail rents in prime shopping areas are rising more rapidly here than in New York, London or Paris.
Average annual rent along Hong Kong's Queen's Road Central - where H&M's soon-to-be-closed flagship store is located - soared to $1,831 per square foot in March, up 35 percent from a year earlier, data from real estate brokerage Colliers International shows. On New York's 5th Avenue, average rents rose 23 percent to $2,633 per square foot.
Colliers estimates Hong Kong's retail rents will overtake New York as early as 2014.
"Hong Kong rents are going through the roof," said Sally MacDonald, chief executive of Australian handbag and accessories maker Oroton, which has been looking to open a store in Hong Kong but could not find the right fit at the right price.
"It's a concern because that's a market that booms and busts and the rents are probably unsustainable," she said.
Some firms are still willing to pay for a prime location in Hong Kong, long considered the gateway to mainland China - a place to study Chinese buying habits before taking on Beijing's bureaucratic challenges. Continued...