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Brands shop for cheap NT space

Natalie Ngan

Thursday, August 09, 2012

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Shop rents skyrocketed as many international brands squeezed into prime shopping districts such as Central, Causeway Bay and Tsim Sha Tsui. This has triggered a trend for relocation, with top brands starting to move north in search of cheaper rents and closer proximity to well-heeled mainland customers.

For example, Prince Jewellery & Watch Co is paying monthly rent of HK$2.5 million for a few hundred square feet at its Causeway Bay location on Russell Street, according to market sources.

In comparison, its newly leased 6,000-square-foot premises at Landmark North in Sheung Shui will only cost about HK$1 million per month.

So it is small wonder well-known retailers have been branching out to shopping malls in Tai Po, Yuen Long, Tuen Mun and Sheung Shui.

Kitty Yau Yuen-ling, assistant sales director of the Hong Kong commercial department at Centaline Property Agency, said rents in Central have risen to nearly HK$1,000 psf.

"Some shop owners double rents during contract renewal, which scares a lot of tenants," Yau said. "The market situation in the retail sector has worsened this year, and the consumption demand of individual visit scheme tourists is low. More international brands may choose to relocate their stores rather than renewing their contracts at their current locations."

Swedish apparel chain H&M's flagship store, opened in 2007 on Queen's Road Central, is to be replaced by the Spanish clothing brand Zara.

H&M will close its shop there after the fall next year due to soaring rents. The Wall Street Journal reported that Zara will take over the 30,000-sq-ft space for US$1.4 million (HK$10.92 million) per month - double what H&M now pays.

Meanwhile, various brands have made their way into malls near the border, where facilities such as Tai Po Mega Mall - the area's largest with nearly 600,000 sq ft of retail space - are aggressively changing their tenant mix to attract both local customers and big- spending mainlanders.

French brand agnes b plans to open an agnes b Delices chocolate shop this quarter, followed by a Sport b casualwear outlet at the end of the year.

Bourjois Paris, Crabtree & Evelyn and The Body Shop are among the personal-care product and cosmetic brands in the mall, developed by Sun Hung Kai Properties (0016).

Frequent shopping tours are organized to lure thousands of residents from Shenzhen, Dongguan, and Guangzhou, who are expected to spend HK$4,500 to HK$8,000 per person.

Maureen Fung Sau-yim, Sun Hung Kai Real Estate Agency general manager for leasing, expects pedestrian flow to rise 10 to 15 percent to 77 million at Tai Po Mega Mall, with sales revenue climbing 12 to 15 percent year-on-year to HK$2.6 billion.

"There is great potential for the shopping malls in the New Territories to develop. A larger customer base can be achieved, as the shopping malls improve their tenant mix and increase various tourist-based promotions," Fung said.

At Yuen Long Plaza, another SHKP development, 15 new tenants - including jewelers, audio/visual, and personal-care product retailers - have been signed up this year to tap mainland customers. The mall has even partnered with Kowloon Motor Bus to provide free rides between Yuen Long and Shenzhen for shoppers spending HK$400 or more.

Fung expects pedestrian flow at Yuen Long Plaza to reach 47 million for the whole year, up 10 to 15 percent from last year, with sales revenue jumping 12 to 15 percent to HK$700 million.

At Sino Group's Tuen Mun Town Plaza, H&M, Zara and Lancome have recently opened stores, with Rolex, Tudor, NSK, Estee Lauder and Marks & Spencer following suit later this year.

Tuen Mun Town Plaza has always been well-patronized by mainland customers under the individual visit scheme, as the mall is only a 15-minute drive from Shenzhen Bay Port, said Ronnie Chan Yam-ling, general manager of Sino Property Services.

In the second quarter next year, SHKP will open a new shopping mall atop Tuen Mun West Rail station, named V City.

"Various renowned tenants and brands have signed contracts with us, with 80 percent of the brands making their initial presence in Tuen Mun, such as agnes b and Haagen-Dazs," said Jimmy Wong Chin-wah, executive director of Sun Hung Kai Real Estate Agency.

Landmark North - another SHKP development - recently saw five international watch brands interested in leasing retail space.

"We want to expand our sales network outside Central, Tsim Sha Tsui and Causeway Bay, to make shopping more convenient for mainland customers, who make up 80 percent of all our customers," a Prince spokesman said.

"As a lot of potential customers live in Shenzhen Nanshan district, we will gradually develop our network in the New Territories in the future."


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