The humbling of Russell Street in the heart of Causeway Bay which was forced to hand back the crown as the world’s most expensive shopping stripe to New York’s Fifth Avenue is widely taken to signify the end of the golden era for tourism and retail in Hong Kong.
Most people who have followed the rise of the tourism and retail industries since 2003 knew the end was coming when Prada, the go-to fashion brand for the throng of crazy rich mainland shoppers, announced it would not renew the lease on its flagship stores on that street when it expires next year.
The owner of the property, Plaza 2000, has offered to cut the rent by a staggering 44 percent to entice new tenants, according to a SCMP report. Other landlords on that strip, which was once described as paved in gold, are expected to follow suit in the fight to fill retail space which is no longer in demand at any price.
The decline in tourist arrivals and sluggish retail sales began many months ago. The trend has been exacerbated in the past three months by repeated street violence that targeted not only Causeway Bay but also other busy commercial districts in Tsim Sha Tsui and Mong Kok.
Latest figures show that retail sales in August tumbled 40 percent from a year earlier and many hotels, especially those located outside the tourist districts, have suffered a sharp drop in occupancy rate. Some hotels are offering deep discounts as much as 50 percent the regular room rates to help fill rooms.
Retailers are running to the government demanding the wavering of fees and charges to help them tie over the lean times. What they should keep in mind is that the lean times are not as temporal as they may think. Instead, retailers and caterers will have to accept what is to become the new normal.
To be sure, some businesses, such as pharmacies, jewelers, fashion boutiques and eateries that cater almost exclusive to mainland tourists will for forced to close because they can no longer count on the extraordinarily high profit margins to cover their rental costs. Others will have to adapt by taking advantage of the lowering retail rents to enhance their competitiveness by improving their services and accept a narrower profit margin to woo local customers.
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