Five Guys, the American burger chain, is opening a branch on Russell Street, taking advantage of a near 60 per cent drop in rents following an exodus of luxury brands.
It will be the first US fast food outlet on one of Hong Kong’s most exclusive shopping strips since 2013 when McDonald’s, the world’s largest chain of hamburger restaurants, had to move out because of soaring rent.
Five Guys has agreed to lease 6,700 square feet on the first floor of Emperor Watch and Jewellery Centre for HK$670,000 (US$86,250) a month, or HK$100 per sq ft, 58 per cent lower than the nearly HK$1.6 million paid by cosmetics retailer Sa Sa International Holdings, according to people familiar with the deal.
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Emperor International Holdings, owner of Emperor Watch and Jewellery Centre and the largest landlord on Russell Street, said it had no comment, while Five Guys did not immediately reply to inquiries from the Post.
Hong Kong retail sales plunged by a record 24.3 per cent year on year in 2020, as coronavirus pandemic dampened consumer sentiment. A lack of tourist arrivals, which tumbled 94 per cent to 3.6 million, made matters worse.
Luxury brands like lingerie label La Perla, skincare retailer Kiehl’s and watch brands like Rolex and Omega have either closed stores or downsized to smaller outlets on Russell Street since September last year. Their move followed Prada, which was the first major global brand on the street to shut its flagship store in 2019.
When the Post visited the Sa Sa outlet on Wednesday evening, a saleswoman said the store would stop business immediately as “we need to pack up the inventory”.
In 2013, McDonald’s vacated the same space that will be occupied by Five Guys. Sa Sa, the next occupant, rented the space for HK$1.58 million a month, more than three times the HK$500,000 paid by McDonald’s.
Five Guys, which currently has five outlets in Hong Kong, opened its first branch in Wan Chai in November 2018.
The 250-metre long Russell Street in Causeway Bay has for years been the world’s most expensive shopping street, overshadowing anything Paris or London has to offer.
Annual rent on the street dropped to US$2,000 per square foot in the first quarter last year, a third lower than its highest level recorded in 2013, when it was first crowned the most expensive shopping strip globally, according to property consultancy Cushman and Wakefield.
Hong Kong’s retail landscape has seen a significant change in the past year as more luxury brands have shut their stores in the city’s priciest locations, and replaced by mid-priced brands that target local customers.
“The decline in mainland spending is one of the biggest threats to the luxury sector’s future. Without tourists, it is not feasible for luxury brands to keep so many stores, especially with high rents,” said Lucia Leung, associate director of research and consultancy for Greater China at Knight Frank.
Retail rents have dropped by about 50 per cent or more in prime streets since the spending mood was dampened by the coronavirus pandemic, she added.
International brands such as Victoria’ Secret, Adidas, Topshop, Swatch and GAP have closed their shops in Causeway Bay and in Central last year amid a plunge in tourism due to the coronavirus pandemic and social unrest since June 2019.
The vacancy rate in Hong Kong’s tourist belts - Causeway Bay, Central, Tsim Sha Tsui and Mong Kok - was 16.9 per cent at the end of the fourth quarter last year, the highest since mid -2016, according to JLL.
However, businesses targeted at local consumers have swooped in, taking advantage of the sharply lower rents.
Japanese discount store operator Don Don Donki opened a 17,800 sq ft branch in Queen’s Road Central and mid-priced French sporting goods chain Decathlon rented a 9,300 sq ft shop previously taken by luxury leather goods retailer MCM in Entertainment Building in Central.
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