Hong Kong may be long celebrated for shopping but economic headwinds since the Covid-19 pandemic have more than halved retail rents from their pre-pandemic peaks.

Lower rents, nonetheless, represent an opportunity for big brands to secure prime retail space at a fraction of the pre-pandemic costs and, more significantly, create wiggle room for them to review Hong Kong's role in their regional strategies.

Thus, could Louis Vuitton's reported negotiations with New World Development to open a 40,000-square-foot store at the latter's K11 Musea mall in Tsim Sha Tsui - along with Chief Executive John Lee Ka-chiu's announcement of a special visa scheme for Asean VIPs - signal a comeback for the city's luxury retail sector?

It is clear that the SAR is trying to leverage lowered retail rents and convenient visa schemes to tap the wealth of the well-heeled in Southeast Asia.

Louis Vuitton's reported plan shows how a global brand capitalizes on changing market dynamics.

The store that the French luxury brand has in mind is set to be among its largest outlets in Asia, featuring not just retail space but also a museum, cafe and VIP lounge, which are all about experiential shopping as consumers these days want more than merely purchases.

This is a global trend.

For example, South Korean eyewear brand Gentle Monster is known for its innovative and artistic retail spaces looking like art galleries.

New York-based beauty brand Glossier, initially only a digital store, has expanded to the high street offering an immersive shopping environment.

For New World Development, importance of the deal's success could not be over-stated. Burdened with massive debts and losses for the fiscal year ending June 2024, luxury tenants like Louis Vuitton could boost foot traffic and, more crucially, enhance rental rates across the complex.

Bloomberg analysts believe that the deal, if successful, could reinforce the mall's status as a luxury hub.

The exact rents have not been revealed. However, for Louis Vuitton, lower rents would offer a cost-effective opportunity to expand its Asian presence when its rivals are also upgrading their stores. A clustering of luxury brands at the same mall would draw more high-spending consumers and justify investment.

The breakthrough is not happening by chance. In 2023, Louis Vuitton staged its Men's Pre-Fall 2024 show at K11 Victoria Dockside.

However, timing can be critical. Reports of the likely deal came as Lee announced a special admission scheme to offer Asean VIPs fast immigration clearance, dedicated visa counters and stay of two months or more to attract these high-net-worth individuals.

Asean's economic clout is on the rise. With a combined GDP of over US$3 trillion (HK$23.4 trillion) and an expanding affluent class, countries like Singapore, Malaysia, Indonesia and Thailand could be rich soil for consumption of luxury items.

In 2024, an estimated 2.3 million Asean nationals visited Hong Kong.

The assumption is that as the SAR continues to tap into the Asean market, they would fill a retail gap left by mainland tourists whose consumption patterns have largely changed from lavish shopping to budget spending since the pandemic.

Louis Vuitton is looking at opening a huge outlet at K11 Musea that will focus on experiential shopping.

French flair, Asean big spenders could resurrect luxury market