Hong Kong sees deeper retail rent cut as global brands cool off

Giordano International

16/07/2015 09:35

* Retail rents forecast to fall up to 40 pct from peak 
    * Hong Kong tourist growth slows to 3.6 pct in May 
    * Burberry says may push for lower rent at 17 city stores 
 
    HONG KONG, July 16 (Reuters) - Rents are expected to fall as 
much as 40 percent this year in Hong Kong's bustling shopping 
district of Causeway Bay, until recently the world's most 
expensive retail street, hit by a slowdown in visitors, 
particularly cash-rich mainland Chinese.  
    Some landlords are seeking rents as much as 40 percent below 
last year's peaks, outstripping analysts' forecasts of drops of 
about 15 percent in 2015, but some retailers say the reduction 
might not be enough to offset weak sales. 
    "Many retailers are focused on improving the same stores' 
sales, instead of opening more stores," said Caroline Mak of the 
Hong Kong Retail Management Association, pointing to a drop-off 
in tourist arrivals, especially those from the mainland. 
    "Hong Kong retail has been weak in the first half and we 
can't see anything positive in the second half." 
    British luxury goods maker Burberry  BRBY.L  says its Hong 
Kong comparable store sales fell by a double-digit percentage in 
the quarter ending June 30, becoming the latest brand to show 
business is hurting. 
    If sales weakness persists, Burberry said, it may push for 
lower rents for its 17 Hong Kong stores at lease renewal time. 
 ID:nL5N0ZV0NA  
    Some of the biggest retailers, such as jeweller Chow Sang 
Sang Holdings  0116.HK  and casual wear brand Giordano 
International Ltd  0709.HK , have shut stores and frozen 
expansion in the past year, as mainland Chinese tourists, their 
key customers, have dried up.  ID:nL3N0YA1CV   
    Years of strong sales, fed by visitors' voracious appetite 
for everything from cosmetics to watches, had allowed retailers 
to pay some of the world's highest rents, such as in Causeway 
Bay, which beat out New York's Fifth Avenue as the world's 
priciest retail space three years ago. 
    Hong Kong's retail sector has also been hammered by tighter 
visa rules on residents of the neighbouring southern Chinese 
city of Shenzhen, lower mainland import taxes on some items and 
street tension between the cross-border cousins.   
    Many retailers have been forced to hold summer sales earlier 
than before, some offering discounts as high as 70 percent. 
    Visitor numbers to Hong Kong rose 3.6 percent in May on the 
year, down from year-earlier growth of 10.8 percent, Hong Kong 
Tourism Board data shows. Mainland tourist numbers in May rose 5 
percent, down from growth of 13.1 percent a year earlier. 
    Hong Kong May retail sales were down 0.1 percent by value on 
the year, following a revised drop of 2.1 percent in April and a 
decline of 2.9 percent in March, as slower tourist arrivals hurt 
sales of big-ticket items.  ID:nL4N0ZF1PT   
 
 (Reporting by Donny Kwok and Yimou Lee; Editing by Clarence 
Fernandez) 
 ((donny.kwok@thomsonreuters.com; +852 2843 6470; Reuters 
Messaging: donny.kwok.reuters.com@reuters.net)) 
 
Keywords: HONGKONG RETAIL/