Hong Kong tops the world in many ways, though not always in a positive sense. Having the most expensive retail rents is one of them.
Thankfully, the crown has been passed on to New York amid a much-needed post-Covid adjustment spurred by changing tourism and shopping trends. But levels are still uncomfortably high for many struggling businesses.
According to the latest survey by a property consultant, the tourist hotspot of Tsim Sha Tsui has slipped to third place globally, trailing New York’s Fifth Avenue and the Via Montenapoleone in the Italian fashion capital of Milan.
But the city still leads the Asia-Pacific region, with Tsim Sha Tsui and Causeway Bay fetching US$$1,493 and US$1,374 per square foot per year, respectively. Along with Central, rents have fallen between 39 per cent and 46 per cent since the pandemic.
This is seemingly a healthy adjustment, even though it may not be welcomed by landlords who were charging exorbitant rents before. It also speaks volumes for changing consumer behaviour and business operations as the city slowly emerges from the coronavirus crisis.
Fewer mainland tourists are coming for high-end shopping. They are instead more drawn to in-depth city walks and other exploratory experiences.
The apparent shift from foot traffic to online traffic as a result of more work from home and internet shopping may have also dampened the general demand for retail space.
Despite the devastating impact on the economy, the pandemic has brought a silver lining to those who could see through the trend.
Some retailers have turned from conventional street shops and malls to the internet, while others take advantage of cheaper rents to open new premises or expand business.
The ups and downs in prices have been part and parcel of necessary market adjustments over the past decades. Whether the city will reclaim the crown for the most expensive retail rents remains to be seen.
But levels are undoubtedly too high for many businesses, which are still struggling to cope with the fallout from the pandemic. With economic recovery remaining fragile, a steady adjustment in operating costs is not necessarily bad.