A store rented by Jaeger-LeCoultre in Hong Kong’s Russell Street, once the world’s most expensive strip for retail rents, will be leased to a new tenant for more than 40 per cent less as the effects of China’s economic slowdown continue to be felt in the city.
Cosmetics brand Colourmix, run by Veeko International Holdings Ltd., will rent a 1,000 square-foot space on Russell Street in Causeway Bay for close to HK$1 million ($129,000) per month, 43 per cent lower than what watch brand Jaeger-LeCoultre is currently paying, said Lawrence Wong, a director at property agent Sheraton Valuers Ltd., which handled the transaction.
“Landlords have to face the reality no matter how reluctant they are,” Wong said by phone on Saturday. “It’s still better than leaving their property empty.”
Russell Street, which had recorded the world’s highest retail rents, lost top spot to New York’s Fifth Avenue, according to broker Cushman and Wakefield Inc. last November. In a July research report, Jones Lang LaSalle Inc. predicted high-street rents will drop 15 per cent to 20 per cent in Hong Kong this year.
In Central, the centre of Hong Kong’s business district, Adidas Hong Kong Ltd. will lease the space currently occupied by Coach Hong Kong Ltd. at a rent 23 per cent cheaper, according to Land Registry data. The sports brand will take up the property for HK$4.34 million a month, down from the HK$5.6 million that Coach is paying.
Retail rents dropped 12 per cent in Causeway Bay and 3 per cent in Central, as of the end of June, Oriental Daily reported earlier this month, citing data from CBRE Group Inc. The broker said in a report that the decline came after rents for shops at prime locations in Hong Kong’s four shopping districts, including Tsim Sha Tsui and Mong Kok, increased by 213 per cent from 2003 to 2014.
Hong Kong’s retail property market has slumped as China posts its weakest growth in a quarter century. The world’s second-largest economy will announce a growth objective of 6.5 per cent to 7 per cent for 2016, according to eight of 15 economists in a Bloomberg News survey conducted Sept. 17-22. All of those surveyed said they expect next year’s target will fall short of the about 7 per cent set by Premier Li Keqiang for 2015 growth.
The city’s residential market also is experiencing weaker sentiment. “Housing market outlook will likely become more cautious amid increased volatility in the global and Hong Kong’s financial markets,” the Hong Kong Monetary Authority said in a report released Friday. “The risk of downward adjustment has picked up steadily.”
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