Hong Kong Retail Rents Remain Sky-High Despite Slowdown

Even as slumping sales force luxury brands renegotiate retail rent prices and close stores in Hong Kong, a new report finds that it’s still the second-priciest place in the world to open up shop.

According to Cushman & Wakefield’s newly published “Main Streets Across the World” report, Hong Kong’s Causeway Bay area retained its second-place rank after New York’s 5th Avenue as the most expensive retail location globally this year. Causeway Bay retail rent cost an average of US$2,399 per square foot a year, an amount far above the next-highest cost on Paris’ Avenue des Champs Élysées, which came in at US$1,372 per square foot. However, a continued retail sales slump driven by fewer mainland tourists could drop its ranking next year as top luxury brands rethink their Hong Kong strategies.

The listing comes in spite of several Hong Kong store closings by luxury retailers over the past year that include Coach’s Queens Road Central flagship and TAG Heuer’s Causeway Bay store. Many companies such as Burberry—which is reducing the size of its largest store in Hong Kong—have said they are attempting to renegotiate their rent prices. These include Kering, Prada, and Chow Tai Fook, and more store closings may follow depending on negotiations.

The report notes that “downward pressure on rents is becoming increasingly evident on the back of weaker retail sales and the slowing in tourist arrivals.” As a result, rents in Causeway Bay fell by 12 percent year-on-year for the period ending in June 2015, while Central, Tsim Sha Tsui, and Mongkok fell by between 11.9 and 13.9 percent.

Shanghai was the only other location in Greater China to make the list of 65 locations, with West Nanjing Road moving up to 11th place from 12th place last year. Tokyo’s Ginza district and Seoul’s Myeongdong area—both top destinations for Chinese tourists—also ranked high on the list at 7th and 8th, respectively.