Some global luxury brands are switching to short-term leases and pop-up outlets in Hong Kong, taking advantage of cheaper rental charges amid soaring vacancy rates in what was once the world’s most expensive high street commercial property market.
Louis Vuitton is one such brand making the switch, with an Objets Nomades Collection show last month that exhibited furniture and homewares at a two-level store in the Pedder Building diagonally across the road from its Landmark building boutique in Central. Sennet Freres, the century-old Parisian watchmaker, returned as a bespoke wedding gown couturier in December, occupying a four-storey, 8,740 square feet (812 square metres) space left empty since September by La Perla on Russell Street in Causeway Bay.
“We have confirmed several deals for big brands to take up between 1,000 square feet and 10,000 sq ft in Central and Causeway Bay for a term ranging from 10 days to three months,” said Oliver Tong, head of retail at JLL in Hong Kong.
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The short lease is becoming the survival tactic for retail brands, especially those at the higher end that suffer the most from disappearing foot traffic and vanishing mainland Chinese shoppers, to help them pull through Hong Kong’s worst recession on record and the city’s unprecedented retail slump. Vacancy rates in Central stood at 15.3 per cent in the first quarter while 14.4 per cent of available retail space stood empty in Causeway Bay.
Shopping centre operators are also exploring new concepts, including the integration of art and cultural exhibition with retail sales to turn shopping into a social experience to attract foot traffic and generate business for their tenants.
Hongkong Land, a unit of the conglomerate Jardine Matheson and the largest landlord in Hong Kong’s Central district, opened hybrid cultural and retail space called BELOWGROUND at the basement of its Landmark Atrium in March. The first show there, called Time Travel, featured local artists Afa Annfa and Chino Lam with the street artist Cope2 on the same floor as the luxury brands Dior Men, Kenzo, Gucci Men and Celine Men.
Landlords are now willing to give up some retail space towards the creation of a shopping experience by promoting culture and the arts as vacancy rates have risen, said Colliers.
“It will be beneficial to the overall performance of the shopping centers, as more visitors check in on their social media accounts, [share or] talk about the malls,” said Cynthia Ng, executive director of Retail Services at Colliers. “[The social buzz] will continue to drive traffic, and thus sales.”
K11 group, founded by New World Development’s executive vice-chairman Adrian Cheng Chi-kong, said its sales grew 49 per cent, and traffic increased 50 per cent year- on- year after it rolled out a series of cultural-retail experience across its malls in Hong Kong, Guangzhou, Shanghai, Wuhan and Shenyang during the Labour Day Golden Week Holiday from 28 April to 5 May.
“We organised more than 1,000 art and cultural programmes in Hong Kong and more than 5,000 in Greater China, reaching millions of people since 2009,” said a K11 spokesman.
Swire Properties, which owns shopping malls and grade-A office in Admiralty and Quarry Bay, has hosted more than 200 events and received over one million visitors at ArtisTree, a permanent venue for hosting or sponsoring different activities for tenants at Taikoo Place in Quarry Bay and the Hong Kong community since it opened in 2008, according to chief executive Guy Bradley.
“Many multinational corporations nowadays look beyond just the provision of office space. They increasingly place emphasis on the well-being of their workforce and look for a working environment with a broad range of amenities that can help to attract talent,” Bradley said.