Rather than leave their properties standing idle, some retail landlords are launching brand new business ventures to fill the vacant space.
The collapse of retail rents and high vacancy rates in some of Hong
Kong’s main shopping districts is forcing some landlords to get
creative. Rather than leave their buildings standing idle, some are
launching brand new, totally unrelated business ventures to fill the
vacant space.
Two joint owners of a five-storey retail complex at
53 Carnarvon Road, Tsim Sha Tsui, for example, plan to open their first
cosmetics store on the premises on September 17.
Formerly
occupied by a jewellery shop, the space will now become a concept store
named Art Piece, offering more than 200 cosmetics brands from the US,
Europe, Japan and Korea. Sales will take place both on and offline.
“Where
there is risk, there is opportunity,” said Art Piece owner M2R
Investment in a written reply to the Post. M2R Investment is run by
directors Ng Kwok-chun and Ng Kwok-hing, according to a filing to the
company registry.
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Their
bold move comes after a growing number of international brands such as
Victoria’s Secret, the American retailer known for its seductive
lingerie, Greek jeweller Folli Follie and the US clothing company J.
Crew Group have closed their shops in Hong Kong amid a huge fall in
tourist numbers and the city’s worst ever recession.
Retail rents
have tumbled as much as 71 per cent from their peak in 2014 in four
core locations – Central, Causeway Bay, Tsim Sha Tsui and Mong Kok – in
the second quarter of this year, according to JLL. Rents in Tsim Sha
Tsui lost 61.4 per cent during that period.
“Landlords have been
worst hit by the battered retail market. They may seek to run retail
businesses in their own properties if they have the resources. Why not
try it?” said Oliver Tong, head of retail at JLL in Hong Kong. “Retail
rent will not bottom out until the last quarter this year.”
The
heads of M2R Investment are also two of four directors of Elite Faith
Investment, which owns the property at 53 Carnarvon Road, according to
Land Registry documents.
The last tenant at the address was Chow Sang Sang Jewellery, which paid HK$2.3 million a month, the records showed.
“We
see this a good time to create a brand-new online-and-offline platform
in the beauty industry. People are getting used to shopping online
during the pandemic outbreak. Our online platform gathers over 200
trendy beauty brands from all over the world which allows customers to
purchase anytime, anywhere,” said M2R in their reply.
It is the firm’s first venture into retail in Hong Kong.
In
the second quarter of this year, the vacancy rate in Tsim Sha Tsui was
20.8 per cent, the highest among the four area core areas listed by JLL.
“It
is hard to find any tenant to take up big spaces. We have seen the
biggest number of empty shops in tourist belt since 1997,” said Tony Lo,
a director in the retail department of Midland IC&I.
He said
some landlords might be tempted to come up with creative solutions such
as running a retail business themselves because the lack of rental
costs could minimise the risk.
Rent for street level shops in Tsim Sha Tsui have taken a sharp fall.
A
1,072 square foot shop on Carnarvon Road was rented out for HK$200,000 a
month, or HK$186 per square foot last week, roughly half the HK$390,000
asking price, agents said.
It was 60 per cent lower than a peak of HK$535,000 in 2013.
Milan
Station, selling second-hand designer label leather bags, announced it
has signed a three-year lease for a 2,060 sq ft shop on the ground floor
of The Camphora at 51-52 Haiphong Road, Tsim Sha Tsui for HK$10.2
million in total. That represents a monthly rate of HK$283,000, or
HK$137 per sq ft, 64 per cent lower than the HK$800,000 paid by the
previous tenant, Sa Sa Cosmetic.
Lawrence Wan, senior director of
advisory and transaction services for retail at CBRE Hong Kong, said
some landlords have previously formed joint ventures with big brands to
open shops in Hong Kong.
“We still have to observe for several months before seeing if it will develop an obvious trend,” he said.