Hong Kong News

Nonpartisan, Noncommercial, unconstrained.
Saturday, Feb 24, 2024

Hong Kong loses luster as retail units go vacant and big brands look to China

Hong Kong loses luster as retail units go vacant and big brands look to China

Hong Kong, one of the world's top luxury shopping destinations, is losing its luster as high-end retail properties go vacant and famous foreign brands reduce exposure to the city in favor 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 percent 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 percent, 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 percent 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 percent of inbound tourists in 2019. Jewellery, watches, clocks and valuable gifts sales in 2022 at HK$38.8 billion (US$4.9 billion), for instance, were less than half their 2018 value.

And while inbound travelers in January tripled from December as Covid restrictions were lifted and travel resumed, arrivals were still only about 10 percent of 2019 levels.

Morgan Stanley forecast Hong Kong visitor numbers this year will reach just 70 percent of 2018 arrivals. It estimates retail sales will grow 15 percent, holding at around 80 percent of retail trade from the pre-Covid year.

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.

Visitors to Macau in January more than tripled from December, hitting 40 percent of the level of January 2019. Hainan, which reported visitor growth even during the pandemic, saw arrivals rise 11 percent between Jan. 8 and Feb. 15 compared to the same period a year earlier, according to the government.

"(Hong Kong) will never be back to the level it was, like a decade ago, when it was the only, I would say, duty free location where Chinese would go," L'Oreal CEO Nicolas Hieronimus told Reuters.

"Now they have many more options."

Duty free malls in Hainan, where tourists are the main customers, reported an 84 percent jump in sales in 2021, the latest data from consultancy Bain & Co showed, outpacing the mainland's average growth rate of 36 percent in luxury sales for that year.

Hainan also accounted for 13 percent of China's domestic luxury spend in 2021 versus 6 percent pre-pandemic, and tax regulations are set to ease further, allowing more duty-free stores to open.

That helped China's domestic luxury sales double to 471 billion yuan (US$68.8 billion) in 2021 from 2019, according to Bain. That outstripped total Hong Kong retail sales from a peak hit in 2013 at HK$494.5 billion (US$63.0 billion), according to the city's statistics department.

This imbalance in favor of increasing sales in China had big luxury brands opening stores across the country over the last few years, according to filings and company websites.

Hermes, with 27 stores in the mainland, opened a new, enlarged store in Nanjing in January, relocating to upscale mall Deji Plaza. It first opened a store in 2010 in the eastern city.

Gucci owner Kering opened nine boutiques in Greater China in 2021; upscale men's suit maker Brioni opened stores in Chengdu, Wuhan and Shenzhen; jeweler Boucheron opened two mainland stores.

Saint Laurent, another Kering brand, opened its first flagship stores in Shanghai and Beijing in 2019. The group's jeweler Qeelin has also been expanding in the mainland and opened its largest flagship store in China in Shanghai in 2021.

Despite the increasing investment in the mainland, some are still hopeful about the long-term outlook for Hong Kong as global economies and holiday travel recover.

"Macau is another tax-free destination and Hainan is duty free. Yet, you don't find the breadth and depth of mono-brand stores in Hainan that you can find in Hong Kong," Luca Solca, managing director for luxury goods at investment management firm Sanford C. Bernstein, told Reuters.

"Hong Kong remains very attractive for Chinese consumers."

Related Articles

Hong Kong News
It's always the people with the dirty hands pointing their fingers
Paper straws found to contain long-lasting and potentially toxic chemicals - study
FTX's Bankman-Fried headed for jail after judge revokes bail
Blackrock gets half a trillion dollar deal to rebuild Ukraine
Steve Jobs' Son Launches Venture Capital Firm With $200 Million For Cancer Treatments
Google reshuffles Assistant unit, lays off some staffers, to 'supercharge' products with A.I.
End of Viagra? FDA approved a gel against erectile dysfunction
UK sanctions Russians judges over dual British national Kara-Murza's trial
US restricts visa-free travel for Hungarian passport holders because of security concerns
America's First New Nuclear Reactor in Nearly Seven Years Begins Operations
Southeast Asia moves closer to economic unity with new regional payments system
Political leader from South Africa, Julius Malema, led violent racist chants at a massive rally on Saturday
Today Hunter Biden’s best friend and business associate, Devon Archer, testified that Joe Biden met in Georgetown with Russian Moscow Mayor's Wife Yelena Baturina who later paid Hunter Biden $3.5 million in so called “consulting fees”
'I am not your servant': IndiGo crew member, passenger get into row over airline meal
Singapore Carries Out First Execution of a Woman in Two Decades Amid Capital Punishment Debate
Spanish Citizenship Granted to Iranian chess player who removed hijab
US Senate Republican Mitch McConnell freezes up, leaves press conference
Speaker McCarthy says the United States House of Representatives is getting ready to impeach Joe Biden.
San Francisco car crash
This camera man is a genius
3D ad in front of Burj Khalifa
Next level gaming
BMW driver…
Google testing journalism AI. We are doing it already 2 years, and without Google biased propoganda and manipulated censorship
Unlike illegal imigrants coming by boats - US Citizens Will Need Visa To Travel To Europe in 2024
Musk announces Twitter name and logo change to X.com
The politician and the journalist lost control and started fighting on live broadcast.
The future of sports
Unveiling the Black Hole: The Mysterious Fate of EU's Aid to Ukraine
Farewell to a Music Titan: Tony Bennett, Renowned Jazz and Pop Vocalist, Passes Away at 96
Alarming Behavior Among Florida's Sharks Raises Concerns Over Possible Cocaine Exposure
Transgender Exclusion in Miss Italy Stirs Controversy Amidst Changing Global Beauty Pageant Landscape
Joe Biden admitted, in his own words, that he delivered what he promised in exchange for the $10 million bribe he received from the Ukraine Oil Company.
TikTok Takes On Spotify And Apple, Launches Own Music Service
Global Trend: Using Anti-Fake News Laws as Censorship Tools - A Deep Dive into Tunisia's Scenario
Arresting Putin During South African Visit Would Equate to War Declaration, Asserts President Ramaphosa
Hacktivist Collective Anonymous Launches 'Project Disclosure' to Unearth Information on UFOs and ETIs
Typo sends millions of US military emails to Russian ally Mali
Server Arrested For Theft After Refusing To Pay A Table's $100 Restaurant Bill When They Dined & Dashed
The Changing Face of Europe: How Mass Migration is Reshaping the Political Landscape
China Urges EU to Clarify Strategic Partnership Amid Trade Tensions
The Last Pour: Anchor Brewing, America's Pioneer Craft Brewer, Closes After 127 Years
Democracy not: EU's Digital Commissioner Considers Shutting Down Social Media Platforms Amid Social Unrest
Sarah Silverman and Renowned Authors Lodge Copyright Infringement Case Against OpenAI and Meta
Why Do Tech Executives Support Kennedy Jr.?
The New York Times Announces Closure of its Sports Section in Favor of The Athletic
BBC Anchor Huw Edwards Hospitalized Amid Child Sex Abuse Allegations, Family Confirms
Florida Attorney General requests Meta CEO's testimony on company's platforms' alleged facilitation of illicit activities
The Distorted Mirror of actual approval ratings: Examining the True Threat to Democracy Beyond the Persona of Putin
40,000 child slaves in Congo are forced to work in cobalt mines so we can drive electric cars.