HK unrest sees luxupromotional rubber braceletsry brands shutting shop

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A man looks at a window display outside a Gucci store at Tsim Sha Tsui shopping district in Hong Kong, China. [Photo/VCG]

The prolonged social unrest and losses in retail sales for months in Hong Kong have resulted in luxury international brands closing their flagship stores and increasing vacancy rates in core shopping districts of the city.

While Italian fashion house Prada will close its store on Russell Street in Causeway Bay-dubbed the world"s most expensive shopping street-this June, another luxury brand Louis Vuitton is reported to be planning to close its store at Times Square in Causeway Bay, after negotiations with the mall to cut rents fell apart.

More shops are expected to close in the first half of this year, according to Annie TseYau On-yee, chairperson of the Hong Kong Retail Management Association. She said a previous survey by the HKRMA had said the trimming of staff strength and closure of shops would be "severe" after the Chinese Lunar New Year.

"The Hong Kong retail market is set to see dramatic changes in the market landscape across all retail segments, from luxury to fast fashion, to pharmacy and sportswear," said Lawrence Wan, senior director for advisory and transaction services-retail, CBRE Hong Kong, a global commercial real estate services company.

He said the changes in the market landscape could be rapid, so retailers need to respond to the market more efficiently in order to adapt to the changes.

The social unrest, sparked by the now-withdrawn extradition bill, has dented Hong Kong"s retail sales as the number of tourists to the city dwindled, especially those from the Chinese mainland, who are the driving force behind high-end consumption.

The government figures showed that visitor arrivals to Hong Kong during the new year holidays dipped about 30 percent year-on-year.

Besides, the retail sales in the city fell by 23.6 percent last November from a year earlier, recording its fifth month of double-digit decline while the visitors to Hong Kong declined 56 percent in the same month year-on-year.

The government spokesperson said the violence in the city has severely disrupted tourism and consumption-related activities, further dampening consumer sentiment.

Global management consultancy Bain& Company attributed the negative sales growth of luxury products in Hong Kong to the ongoing protests. According to Bain"s 18th edition of the Bain & Company Luxury Study, the consumption of luxury goods in Hong Kong fell by 20 percent in 2019 to 6 billion euros ($6.71 billion).

With the unrest showing no signs of abating, some shops-after having suffered sales losses-have decided to exit from the core shopping districts, while the others have tried to negotiate with the owners for rent cuts.

Hong Kong"s real estate agency Midland Realty says the vacancy rate in the four core shopping districts of Tsim Sha Tsui, Mong Kok, Causeway Bay and Central will reach 8 to 9 percent this year.

Wan said given the decline in retail sales, there is a downward pressure on retail rents, which CBRE says, will continue to drop in the first half of this year. And for landlords, street shop owners are more flexible when it comes to leasing negotiations.

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