Rents in causeway Bay, an area that used to focus on the tourismtrade, have plummeted since the Covid-19 pandemic kept visitors away.
Once home to the world's highest retail rents, Russell Street has seen its latest leasing prices skydive by more than 80 percent as several international luxury brands have shuttered their doors or relocated.
The prime location's vacancy rate is now also 15 percent higher than during the 2003 SARS outbreak and 2008 financial crisis.
Luxury brands' exodus from Russell Street began early in February, when Italian fashion house Prada terminated its lease four months ahead of the end of its contracted term.
A total of 10 luxury brands have moved out this year, with their areas ranging between 350 and 15,000 square feet.
Although landlords have offered to reduce rents by 40 to 50 percent, that did not generate any interest.
Eventually, seven of them managed to usher in short-term tenants after hefty price cuts. The monthly rents ranged from HK$80,000 to HK$150,000 - up to 80 percent lower than their previous takings.
Two premises on the ground floor of Hong Kong Mansion in Yee Wo Street, with a built-up area of 1,640 sq ft, were rented out to a fashion chain store for HK$500,000. The average rent of HK$305 per sq ft is a 50 percent drop from the previous rent.
The previous tenant was sportswear brand Fila, which moved in two years ago with a monthly rent close to HK$1 million. The original lease was due to expire next April but the brand had abandoned its rental contract in October, half a year in advance.
Kevin Lam Ying-wai, executive director of Cushman and Wakefield, said the high rents on Russell Street have resulted from a "bubble blown out by mainland customers."
He added: "When the consumption pattern changed, revenue plunged and the brand could not survive."
Short-term rentals, Lam said, are an extraordinary phenomenon and current rental prices cannot reflect the value of properties.
Causeway Bay overtook New York's Fifth Avenue and Paris' Champs-Elysees to become the world's most expensive commercial property location in 2012.
The average rent per sq ft at the time was HK$1,699 and subsequently climbed to HK$2,812 in 2013. However, by last year, rents had fallen back to HK$1,520 per sq ft, though it still claimed the top spot in the world.
Data from Cushman and Wakefield shows that the latest average per-sq-ft rent is only HK$870.
Lam said that the street's 2013 peak prices have since been unchallenged due to pockets of local abhorrence of the mainland's individual travel scheme and weak luxury consumption.
Two luxury brand employees who did not wish to be named revealed that their companies had immediately pushed up discount promotions in an attempt to keep up revenue levels after the fourth wave of local outbreaks began.
Though they are able to maintain about 10 groups of customers per day, revenues have dropped by more than 80 percent compared to two years ago, before the social unrest and Covid-19 pandemic began.
Latest retail sales figures from the Census and Statistics Department show that total turnover was estimated at HK$27.4 billion for October, with luxury goods accounted for about HK$2.87 billion. That was a drop of about 30 percent in total sales and 58 percent in luxury goods compared with two years ago.
According to the Tourism Board, the SAR only saw 5,962 visitors in November, plunging 99.8 percent year on year.
staff.reporter@singtaonewscorp.com
