Tsim Sha Tsui Ranked #1 as the Most Expensive Shopping Street in Asia Pacific Despite Biggest Rent Drop in Hong Kong’s History

Rent Declined by 43% for Causeway Bay

Hong Kong, Tokyo, Sydney ranked Top 3 in Asia Pacific

HONG KONG
SAR – Media OutReach – 22 April 2021 – Two-thirds of retail strips in Asia Pacific saw
rental declines in 2020, with Causeway Bay in Hong Kong experiencing the
steepest decline at 43%, according to Cushman & Wakefield’s latest Asia
Pacific Main Streets Report. Causeway Bay had been #1 across the globe in
retail rental value in the last 2 years. Yet, its position was taken over by
Tsim Sha Tsui in 2020. Retail rental dropped by 42% and 35% year-on-year for
Central and Tsim Sha Tsui respectively. On average, retail space rental value citywide
has fell by 38% in Hong Kong  over the
course of 2020.

 

“Ownership
diversity is the key differentiator between Tsim Sha Tsui and Causeway
Bay retail rental performance. Ownership of Canton Road in Tsim Sha Tsui, the
main shopping area, is more centralized when compared with Russell Street of
Causeway Bay. In times of crisis, centralized ownership allows for more
flexible measures to retain tenants, thus maintaining a more stable trade mix
with a cluster of renowned brands with optimal brand impact,” said Mr. Kevin
Lam, Cushman & Wakefield’s Executive Director, Head of Retail Services,
Hong Kong. “Looking ahead, with international travel made possible again
towards the later part of 2021, together with a stable trade mix, we would
expect retail rental performance to recover first in Tsim Sha Tsui district for the same reason,” Mr. Lam
continued.

 

However, the retail sector in Mainland
China had the least disruption amongst all the markets in the region, with
average rental declines of 5%. In contrast to the Beijing Central Business
District (CBD) which had a 14% decrease in rental in 2020, the Luohu district
in Shenzhen saw the largest rental growth of 5%.

 

Mr. Keith Chan, Cushman & Wakefield’s Director, Head of Research,
Hong Kong, commented, “Hong Kong
remained in the top position regardless of the average retail rental drop of
38% in 2020. Tsim Sha Tsui still sits 31% above the second place, Ginza of
Tokyo. This reflects the exceptionally high retail rentals in Hong Kong
regardless of the pandemic outbreak and economic downturn.”

 

“The key market drivers in
operation due to COVID-19, namely international border closures, lockdowns and
work-from-home practices have been universally felt across the region. As a
result, we see little change in Asia Pacific rent cost rankings, at least for
the top 10 cities, with Hong Kong, Tokyo, Sydney, Seoul and Osaka maintaining
their dominance at the top of the list,” noted Dr.
Dominic Brown, Head of Insight & Analysis, Asia Pacific at Cushman &
Wakefield.

Most expensive retail districts by market ranked by Q4
2020 rent (USD/sqft/yr)

RANK 2020	RANK 2019	MARKET	LOCATION	RENT
1	1	Hong Kong	Tsim Sha Tsui	$1,607
2	2	Tokyo	Ginza	$1,223
3	3	Sydney	Pitt Street Mall	$974
4	5	Seoul	Myeongdong	$930
5	4	Osaka	Shinsaibashisuji / Midosuji	$805
6	6	Shanghai	West Nanjing Road	$600
7	7	Beijing	CBD	$500
8	8	Nanjing	Xinjiekou	$470
9	9	Melbourne	Bourke Street	$422
10	10	Singapore	Orchard Road	$421

 

Asia Retail Trends

• Rise of localism – Shoppers have become more supportive of local
  businesses to help them survive through the pandemic. In a 2020 global survey
  of 8,000 consumers carried out by Rakuten Advertising, 50% of households
  responded that they had purchased more from local businesses. Furthermore,
  consumers in Asia Pacific were more likely to avoid making international online
  purchases, showing a preference to spend their money domestically.
• Growth of e-commerce – The pandemic has inevitably increased online
  retailing as lockdowns and health concerns have pushed purchasers onto digital
  platforms. For the Asia Pacific region, which was already a digitally hungry
  region, the growth of e-commerce comes as no surprise. The region has a 64%
  share of global e-commerce at USD2.5 trillion out of a global total of USD3.9
  trillion, according to e-marketer.
• The pandemic has also transformed the luxury goods sector with
  online share of luxury purchases increasing from 12% in 2019 to 23% in 2020,
  according to Bain & Company. However, it remains too early to tell
  if this is a temporary enforced shift or start of a much wider acceptance of
  online retailing for luxury goods. While consumers of luxury goods generally
  prefer to buy in-store to enjoy the accompanying high-quality service, the
  growing presence of omni-channel marketing will have an impact on the evolution
  of the luxury goods sector.

Looking Ahead

The retail sector is facing some of the most significant cyclical
and structural headwinds of all real estate sectors; some of which were in play
prior to COVID-19 while others have occurred as a result of swift and strict
restrictions on domestic and internal population mobility. Such issues have had
a disproportionate impact on high-end retail destinations. It is unlikely that
these districts will immediately spring back to pre-COVID performance because of
the slow pace of recovery in international travel, but at the same time it does
not mean that they will fade into irrelevance. The progress made in the
roll-out of vaccine programs globally and the gradual return to normalcy will
also contribute to the overall recovery of the retail sector.

For retail, in the near term, this means greater bifurcation in
consumer spending; with value-oriented concepts continuing to flourish and
luxury retail rebounding more quickly. Following the 2008 global financial
crisis, global luxury retail generally rebounded within a 12 to 18-month
timeline. Evidence from China in 2020 supports this view, which should provide
a dose of optimism to the luxury sector.

While the focus is understandably on current concerns and difficulties,
it would be remiss not to keep an eye on longer term opportunities. Over the
next decade, the Asia Pacific regional economy will continue to outpace the
rest of the world and grow from a 36% share to 40%. The middle class is
forecast to swell by over 1.5 billion over the same period. These trends,
together with the fact that many markets across the region, especially in South
East Asia, remain underserved by physical retail floorspace highlight the
opportunities on offer beyond the current COVID-19 affected conditions.