Hong Kong Businesses Vanish as Rents Soar: Real Estate
By Kelvin Wong - Apr 2, 2013
Over the past decade, car-repair shop owner Benny Chan has seen more than 70 percent of his small-business peers disappear as his Hong Kong neighborhood fills up with high-end Western bars and Japanese restaurants.
“Rents here are going up multiple times,” said Chan, who’s been in business since 1985 in the Tai Hang area, just east of the ritzy Causeway Bay shopping district. “We’ll all be out of here in the next four to five years.”
Rents are climbing in neighborhoods near Causeway Bay and Hong Kong’s other prime shopping districts, known for luxury stores that attract free-spending tourists from mainland China. That’s squeezing out mom-and-pop shops, congee and noodle vendors and other small businesses like Chan’s as developers and landlords seek to profit from the trend.
“There’s only a limited supply of good spots and the rents are super high” in major shopping districts, Joe Lin, Hong Kong-based senior director for retail services at CBRE Group Inc. (CBG), said in an interview. “It’s natural that restaurants and some retailers would find these fringe areas with an equally hip, high-spending crowd more attractive.”
Shops in Causeway Bay fetch an average $2,630 ($HK 20,417) per square foot a year, the highest in the world, according to a November report by broker Cushman & Wakefield Inc. For a 500- square-foot (46-square-meter) shop, that’s an annual rent of $1.32 million. Across the harbor in Tsim Sha Tsui, retailers including Dolce & Gabbana Srl and Chanel Inc. pay $1,547 a square foot annually. Retail rents in the Central business district, where banks including Goldman Sachs Group Inc. and UBS AG have offices, are $1,856 a year.
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