HONG KONG: Hong Kong, one of the world’s top luxury shopping destinations, is losing its lustre as high-end retail properties go vacant and famous foreign brands reduce exposure to the city in favour of opening new outlets in mainland China.
Glitzy Hong Kong shopping streets once packed with luxury stores that attracted 56 million visitors in pre-pandemic 2019 now have about half of their shop units sitting vacant, according to property management companies.
Rents in Tsim Sha Tsui are down 41% from pre-pandemic levels, according to property firm Cushman & Wakefield, and last year the retail district was displaced as the world’s most expensive shopping real estate by New York’s Fifth Avenue.
Canton Road, the most famous shopping street in Tsim Sha Tsui, has a vacancy rate of about 53%, according to global property company Savills.
“Most luxury retailers don’t think Hong Kong will return to the dizzy levels of 2014 when the market here peaked,” said Simon Smith, Savills’ senior director of research and consultancy in Hong Kong.
“If you walk around the major shopping areas you won’t see the queues outside luxury boutiques or if you do they are very short,” Smith said.
In place of stores shut by Tiffany, Valentino, Burberry and other big brands over the last three years, including in Tsim Sha Tsui, Central and Causeway Bay shopping districts, pharmacies and sports apparel outlets for brands like Adidas and Sweaty Betty have moved in.
Luxury and big brand retail companies mentioned in the story did not respond to requests for comment.
The store closures came after pro-democracy protests and the crackdown that followed pushed sales into a slump which worsened under nearly three years of stringent COVID rules.
Over that period, Hong Kong suffered around a 30% plunge in overall retail sales compared to 2018 levels, largely due to a tumble in mainland visitors because of travel restrictions. Tourists from greater China are the main driver of Hong Kong’s branded retail and luxury goods market.
Hong Kong retail data doesn’t break out luxury goods separately but the sector was hit hard as China accounted for almost 80% of inbound tourists in 2019. Jewellery, watches, clocks and valuable gifts sales in 2022 at HK$38.8 billion ($4.9 billion), for instance, were less than half their 2018 value.
And while inbound travellers in January tripled from December as COVID restrictions were lifted and travel resumed, arrivals were still only about 10% of 2019 levels.
Morgan Stanley forecast Hong Kong visitor numbers this year will reach just 70% of 2018 arrivals. It estimates retail sales will grow 15%, holding at around 80% of retail trade from the pre-COVID year.
MANY MORE ALTERNATIVES
Many luxury brands expanded in mainland China during the pandemic, opening stores in far-flung locations to reach consumers unable to travel. Tourist destinations such as resort island Hainan and Macau also have become popular alternatives as China sought to develop multiple duty and tax free destinations.