Luxury retailers abandon leases in Hong Kong

London - Hong Kong has seen falling retail rents since this the start of the year, with Prada shopping for lower rates back in April and Coach closing a store in a key location.

Hong Kong is seeing luxury brands consolidating their networks with some merging their stores, while others are abandoning their leases altogether. With Chinese shoppers now seeing greater incentives to shop at home, Hong Kong is feeling the Chinese pinch, and brands are surrendering retail spaces well ahead of expiry due to the forecast of weak sales continuing for the coming months.

A study by commercial property advisor CBRE said that this means non-luxury retailers will be the main driver of leasing demand in the Hong Kong retail market.

Overall rents in core locations slumped 9.1 percent quarter-on-quarter, the largest quarterly decline recorded since 1998, as luxury brands have been surrendering spaces or requesting a cut in rents amid slow sales.

Total retail sales value in Hong Kong dipped 2.2 percent between January and August compared to last year, while sales of watches and jewellery slid 8.8 percent.

Causeway Bay was the worst hit, with rents falling by 11 percent quarter-on-quarter, reflecting the sharp rental correction on tier one streets. Rents in Causeway Bay fell 22 percent in the first three quarters of this year.

Hong Kong has some of the highest retail rates in the world, with London, New York, Moscow and Paris rounding out the top five.