Tenants to chip in for Landmark's US$1b facelift

Bloomberg and staff reporter

Hongkong Land Holdings and retail tenants including Hermes and Louis Vuitton will invest US$1 billion (HK$7.8 billion) to revamp the developer's high-end mall in Hong Kong in a vote of confidence in the city's luxury retail industry.

The plan to upgrade Landmark, Hongkong Land's flagship retail space in Central, will create multi-story maison-style stores for 10 tenants, who will see their total shop space double, according to the landlord. It will include new restaurants.

Cartier, Chanel, Dior, Hermes, Louis Vuitton, Prada, Saint Laurent, Sotheby's, Tiffany and Van Cleef & Arpels are expected to spend US$600 million collectively on the fit-out of the new stores. For Hongkong Land, the project will cost US$400 million. The tenants have on average 10-year lease commitments to Landmark.

The bigger store space - more than 220,000 square feet - will allow brands to provide wider assortments of products and more private areas catering to top customers. To make room, Hongkong Land will convert the lowest two floors of a pair of office buildings. The affected office tenants will be relocated within the landlord's portfolio in Central.

"We certainly remain very confident about the long-term prospects of Hong Kong given the concentration of wealth and the development" of the city, Alvin Kong, an executive director at Hongkong Land, said.

Elsewhere, Nan Fung Group said its mixed-use commercial building Airside in Kai Tak has reached a 70 percent office rental rate, with an average rent of HK$35 to HK$50 per square foot.

The project, which opened last September, has leased out nearly 850,000 sq ft to multinational corporations, with rents nearly double the average rate of HK$25 per square foot for Grade A offices in Kowloon East.

The Airside mall's occupancy rate has reached 90 percent, with a 20,000-sq-ft wellness facility opening in mid-July. The group expects a 20 percent increase in foot traffic and a 15 percent increase in revenue for the mall this summer.

Meanwhile, office occupiers in Hong Kong have prioritized rental cost as a key cost optimization initiative amidst a decline in business confidence for the next 12 months, according to a report by Colliers.

The report said this year's proportion of occupiers in Hong Kong who are taking neutral to positive stances on their business outlook dropped by 7 percentage points to 71 percent from last year due to macro uncertainty.

Twenty-seven percent of companies are looking to downsize their office footprint, compared to 21 percent in 2023, while 54 percent saw no change to their current office size.