Even as luxury brands have been making a beeline for Hong Kong in the hopes of gaining a toehold in the Chinese luxury market, property prices in the city have been rising fast. In the recent past, the city has attracted an array of international luxury brands. But it seems to have come at a cost.
As far as rents for retail locations go, Hong Kong has risen to the No. 2 spot on international real estate firm CB Richard Ellis’ list of cities with the highest retail rents. The Asian city currently charges a whopping US$1,697 per square foot of space per annum. Predictably, only New York is ahead of Hong Kong at this point with rates of US$1,900 per annum. Taking the No. 3 spot is Sydney, with a rate of US$1,301. The Australian city is followed by London (US$909) and Zurich (US$829).
In the last quarter, retail property rents rose by 46 percent in Hong Kong even as global rates rose by a far more modest 3.8 percent. Only last year, the Asian city overtook Sydney as the second-most expensive option for retailers. It should be a matter of time before it overthrows New York from its top spot as well.
The link to customers from Mainland China has spurred even casual retail brand Abercrombie & Fitch to shell out HK$7.5 million (US$964,000) for a 12,000-square-foot store in downtown Central. The significant factor is that retailers are willing to pay these high rates because of the access to Chinese customers. 22.7 million crossed the border to shop in Hong Kong in 2010. This April, 2.1 million came down.