Fivelements Habitat, which provides yoga sessions, spa treatments and plant-based cuisine, is shutting its Times Square wellness centre in Causeway Bay after two years of operation, as it failed to reach an agreement with landlord Wharf Reic on the terms of its lease renewal.
The centre, located on level 13A of Times Square’s Tower One, will cease operating at 6pm on September 30, ahead of the expiry of its lease in December, according to a notice to customers.
“We were reaching an inflection point where we’re required to commit to a further lease term and we were not able to reach an economically viable agreement with the landlord,” said Jason Washbourne, managing director of Fivelements’ owner Evolution Wellness Hong Kong in an email interview with the South China Morning Post.
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Fivelements, which opened in Times Square in July 2019, is the latest business to pull back in Hong Kong, after two years of economic havoc first wreaked by months of street protests, and then by lockdowns to contain the coronavirus outbreak. Now, as Hong Kong’s economy claws its way out of its worst recession on record, local businesses are grappling with how they should price commercial real estate while consumption is yet to fully recover amid tentative foot traffic.
Pedestrian traffic has visibly improved at many shopping centres in Hong Kong, including Wharf’s Times Square and Harbour City, as the first HK$2,000 instalment of the city’s consumption vouchers which took effect last month set off a spending spree at shops and restaurants.
The boom may be fleeting, as spending disappeared as soon as the first vouchers were used up, said the Hong Kong Retail Management Association, which represents more than 9,000 retail outlets that employ half of the city’s retail workforce. Sales in August were still 80 per cent lower than the peak in 2018, and consumption in September may decline further until the second instalment of vouchers is distributed, according to estimates by the guild.
That has translated into uncertainties about where retail rents are headed, as many commercial leases are still bound by contractual terms set at the depth of Hong Kong’s economic slump. Average rent across Hong Kong’s shopping centres fell 10.2 per cent in the second quarter from last year, down 45.2 per cent from the peak in 2018, according to data provided by Savills.
“While retailers have regained confidence, premises with corner and extensive shop frontage, high headroom or with provisions for operating restaurants will see a 5 to 10 per cent increase in rents compared to last year,” said Martin Wong, head of research and consultancy in Greater China at Knight Frank.
Landlords and tenants had been caught in a stand-off since last year when the Covid-19 outbreak first reared its head. Nearly 50 brands staged an unprecedented strike in February 2020, closing nearly 200 shops in 14 shopping centres – including Times Square – across Hong Kong to demand rent reductions. Most landlords held out, opting to settle with their tenants on individual cases instead of acceding to across-the-board cuts.
Amid the stand-off, the luxury brand Prada closed its three-storey Russell Street flagship store at Times Square’s doorstep, for which it was paying HK$9 million in monthly rent. As soon as the Milano atelier announced its closure, the landlord offered to slash its rent by 44 per cent, putting a dent into Russell Street’s claim as the world’s most expensive shopping strip.
As the Covid-19 lockdowns wore on and tourists stayed home, luxury retailers exited Causeway Bay in droves. Rolex, Omega and skincare brand Kiehl’s all shut their outlets. The Italian lingerie label La Perla shut its four-floor store, which it rented for HK$7 million a month.
Covid-19 had been particularly challenging for Hong Kong’s beauty and wellness industry, as social distancing measures and lockdowns forced spas, gyms, yoga schools, dance classes and massage centres to shut. Salons and beauty parlours were allowed to reopen in February after shutting for more than 100 days in 2020, leaving the industry out of pocket by an estimated HK$2 billion (US$258 million).
While some businesses have bounced back, others are still struggling to recover their lost revenue as many customers continue to stay home.
“We are saddened that after two years of business disruptions, we have not been able to reach a workable agreement with the landlord,” said Washbourne. “It’s both sad and perhaps ironic that we face these challenges in a city that has been through so much, and where there is so much to be gained at the community level with a brand like Fivelements.”
Wharf Real Estate Investment Company (Wharf Reic), the manager of Times Square, did not respond to requests for comment. Still, Wharf Reic’s chairman and managing director Stephen Ng did note during the company’s interim results briefing last month that rents had faced “downward pressure,” culminating in lower charges on new leases as the lagging effect of the economic slump makes its way to property landlords.
Fivelements operates a retreat in Bali, and a wellness centre in Hong Kong measuring 15,000 sq ft (1,393 square metres). The monthly rent for Times Square’s Tower One ranges from HK$53 to HK$58 per square foot, according to Colliers International’s head of valuation and advisory services Hannah Jeong. The rate was even higher two years ago at HK$60 to HK$65, which would translate to HK$975,000 per month for a business of Fivelements’ size. Washbourne declined to divulge the centre’s rent or say how many customers it has.
Fivelements is “currently seeking alternative space” to continue its business of providing yoga, soundscape and tea meditation in Hong Kong, he said.
“The team is actively pursuing options and we are hopeful that we will find a way to maintain this great community,” Washbourne said.
Some customers are already lamenting the imminent closure.
“It is very unfortunate that the two parties cannot come to an agreement,” said Jocelyn Tam, who practises yoga at Fivelements, adding that the facility was a “calm oasis amid the hustle and hysteria” of Hong Kong.
The company “invested a lot of money decorating and setting up this sanctuary,” she noted, but the government’s restrictions to prevent the spread of Covid-19 have “taken a toll on the membership.”
“It is difficult to maintain or develop good physical and mental habits if there are intermittent interruptions caused by the closure of the premises,” she said.
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