Small-scale retailers and business owners are being pushed out of the market in Causeway Bay and other shopping districts of Hong Kong due to the sharp increase in rents. With a large number of bigger market players flooding the areas, mom and pop stores and ground level retailers are suffering, because landlords are hiking rents up by almost 50 to 70 percent.
"If small retailers and local chain stores can no longer afford to pay landlords' asking rents, they don't have much choice but to get out of street-level premises and move inside shopping malls, to the outskirts of urban areas, or even to the New Territories," Joe Lin Chi-ho, director for retail services at CB Richard Ellis, said to South China Morning Post.
"If the products that they're selling are not in demand by Chinese tourists, it's really difficult for them to match the rent that retailers of luxury goods are willing to pay," he added.
Causeway Bay is one the most expensive retail and shopping destinations of Hong Kong. It attracts a large number of customers from mainland China. According to Bloomberg, on an average, shops in the region cost around $2,630 per square foot for a year. Rent for a 500 square foot shop adds up to around $1.32 million per year. In the Central Business district, rental values amount to $1,856 a year.
In the past five years, rents have gone up multiple-fold for ground level shops and retail stores. On an average, rents went up $5 to $7 per square feet. The rents here are the highest in the world.
Average rents have been forecast to go up 8 percent in 2013. This rate is, however, lesser than the 9 percent and the 27 percent rise in 2012 and 2011 respectively.
Local analysts believe that the rents are not as high as speculated. Brokers also assert that they will gradually decrease, as Chinese customers are cutting down on usage of luxury goods on account of global economic uncertainty.
Meanwhile, Hong Kong is receiving a larger influx of foreign companies in its retail market, despite the sky-ricocheting rents. Brand-new affluent entrants include Victoria's Secret and Tommy Bahama. While the former will be opening two stores, each measuring around 130 square meters at the famous New Town Plaza and the International Finance Center located in the Central Business District, the latter has already opened a 370 square meter store in the Wan Chai District.
