Retail Rents on the Rise Again: The Example of Hong Kong

We know that the cost to rent retail space can be high; and rent varies widely based on the desirability of the location. For instance, the annual rent for a 20,000-foot U.S. retail location in a less desirable area may be $40,000; the average annual rent for a 20,000-foot retail location in the United States is about $400,000; and the annual rent for a 20,000-foot retail location on Manhattan’s upscale Fifth Avenue may be as high as $40 million or more. Yes that’s right, $40 MILLION per year.
The cost to rent retail space is a concern to companies around the globe. The current rental rates in Hong Kong are a good example of this.
As Bettina Wassener and Mary Hui report for the New York Times
“Nam Kee Noodles is a typical Hong Kong restaurant: functional, popular, and busy. A dozen plastic-topped tables offer room for about 40 patrons. Customers line up outside at lunchtime, waiting to consume spicy noodle soup, dumplings, and iced soy milk amid the clatter of plastic bowls and chopsticks. In April, however, the little restaurant, in the heart of Causeway Bay, one of Hong Kong’s busiest shopping districts, nearly had to shut down after the landlord tripled the already-expensive rent.”
“We were paying around 200,000 dollars a month,” said Au Kei-hong, the shop’s manager, referring to an amount in Hong Kong dollars equivalent to about $25,800. “But the landlord then increased it to 600,000. It was too expensive. We cannot afford that.” After frantic negotiations, Mr. Au agreed to a smaller — though still steep — increase that has allowed him to stay put for an additional year. Causeway Bay, where Nam Kee Noodles is struggling to survive among high-end clothing and watch retailers, commands the most expensive retail rents in the world: an average of 1,950 Hong Kong dollars, or $251, per square foot per month [about $3,000 per square foot annually — roughly 50% more than NY’s Fifth Avenue rents!!], according to figures for the first quarter of 2013 from Cushman & Wakefield, a real-estate consulting firm.”
Click the image to read more.

Photo by Lam Yik Fei for the International Herald Tribune

 

 

This entry was posted in Global Retailing, Part 1: Overview/Planning, Part 2: Ownership, Strategy Mix, Online, Nontraditional, Part 4: Store Location Planning, Part 5: Managing a Retail Business, Part 6: Merchandise Management and Pricing and tagged , , , , , , , , . Bookmark the permalink.

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