Hong Kong’s landlords are increasingly betting on restaurants to drive traffic and capture dollars from diners stuck in the city amid border closures, in a bid to boost tenancy sales.
Landlords are keen on securing food and beverage (F&B) tenants even though they tend to pay relatively lower rents, said Simon Smith, regional head of research and consultancy in Asia-Pacific at Savills.
“Dining out is the new vacation. F&B is attractive as long as travel restrictions hold. It helps drive traffic to the malls,” said Smith. “In terms of restrictions, restaurants are quite accessible compared with other entertainment venues.”
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Landlords are “very likely” to convert more spaces to food and beverage use, added Smith. For instance, Wharf Reic has converted two shops on the main retail floors of Times Square into F&B outlets for the first time.
Meanwhile, Pirata Group will have opened 10 new restaurants by the end of 2021, including four at The Sixteenth – covering 18,000 sq ft in Swire Properties’ Taikoo Place in Quarry Bay. They include Italian cuisine at La Favorita and Tempo Tempo, as well as Japanese fare at Honjokko and TMK Funk & Rolls.
“We don’t just look at building office buildings, we look at building communities … F&B is a huge part [of that],” said Francesca von Etzdorf, senior portfolio manager at Swire Properties, referring to its Quarry Bay portfolio. “We have a long-term vision of our partnerships and we look at how we can support those relationships … in the longer term.”
She added, “There are actually a lot of F&B opportunities in the market certainly. Occupancy is high. We’re very confident [with] the portfolio, both in office and F&B.”
The expansion is the “fastest or is the largest we’ve done so far,” said Pirata Group co-founder and CEO Manuel Palacio. “People will be craving for a lot of different experiences in Hong Kong.”
Founded in 2013, Hong Kong-based Pirata has invested between HK$150 million (US$19.27 million) and HK$200 million in the city, including more than HK$30 million at The Sixteenth, he said. It currently has 23 restaurants in Hong Kong and two in Shanghai.
He said demand for high-end dining was “exceptional to Hong Kong” because residents have to stay in the city due to Covid travel restrictions.
“We have disposable income because no one has been travelling, so we are using [it] for the next best thing, which is going for experiences,” Palacio said.
The city’s restaurant sector may see two extremes, he added. “I think you either want to go for something very fast and very affordable, or you want to go for an experience. In between, it’s going to be a little bit more difficult in the coming 12 months.”
Palacio said Hong Kong consumers have a higher acceptance for a wide variety of cuisines from different countries. The city is also attractive because it has easy access to a wide range of F&B products, and the capacity to offer alcohol at affordable prices.
He said Pirata would look for space with reasonable rents so more can be spent on staff and cost-of-goods to deliver a better guest experience. Central is overpriced today because it does not guarantee better traffic, while districts like Quarry Bay have lower rents, he noted.
“Our rent, I believe, is slightly lower than most of the other F&B,” he said.
As of the third quarter, Pirata Group’s sales were running 75 per cent higher than last year. The rapid growth comes as Hong Kong’s GDP grew 7.6 per cent year on year in the second quarter.
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