Clinging on to top spot
Karen Chiu
Tuesday, December 10, 2013
Retail rents in Hong Kong have once again topped the world - but New York is snapping at our heels.
Hong Kong retail space has commanded the highest rents in the world since October 2011, international property consultants CBRE said yesterday.
But it warned local retailers are becoming more cautious.
Rents grew by just 0.12 percent in the third quarter from the April-June period, while in New York they jumped 3.28 percent during the same period, CBRE said.
Also, retail rents stayed flat in Hong Kong during the second quarter from the first three months, while in the Big Apple they jumped 2.69 percent.
Between July and September, CBRE found rents for shops at prime locations in the SAR quoted at an average of HK$4,333 per square foot per annum, compared to the HK$4,328 psf per annum recorded in the second quarter.
This is far higher than the HK$3,150 psf per annum in second-ranking New York and just HK$1,426 psf per annum in third-ranking Paris.
Rents in London, the fourth highest in the world, stood at HK$1,275 psf per annum, while those in Beijing amounted HK$674 psf per annum by the end of September.
"Retailers have the confidence to pay the soaring rents as they expect to continue making huge profits from Hong Kong amid strong consumption by mainland visitors and a positive local sales performance," said Joe Lin, executive director of retail services at CBRE Hong Kong.
Ground-floor units with wide shop fronts in prime locations are rarely available and there is huge demand for them, especially from international brands. For instance, Spanish apparel retailer Zara paid HK$11 million per month, or HK$220 psf, for its flagship shop at Lane Crawford House on 70 Queen's Road Central.
Burberry splashed out HK$1,540 psf for a 5,000-sq-ft shop at 38 Russell Street in Causeway Bay. And in September, a 36,342-sq-ft shop in Star House on Salisbury Road, Tsim Sha Tsui, was leased out to three high-end retailers for a total of HK$15 million per month.
Even so, the growth in retail rents showed signs of slowing during the last quarter as retailers exhibited cautiousness even as they continued to position their businesses for the future.
CBRE expects rents will continue to rise further in 2014 due to a shortage of prime available locations and a lack of new development. But it says the gains will take place at a slower pace.
According to PricewaterhouseCoopers, soaring prices and property curbs have made Hong Kong a less attractive real estate investment destination since 2011.
According to its latest report in collaboration with the Urban Land Institute, many international funds have bypassed Hong Kong recently following the implementation of the double stamp duty in February.
The average return on yield from local property is only about 3 percent, which is considered low by Asian standards.
