April 19, 2024

Soaring Rents in Hong Kong Push Out Mom and Pop Stores

HONG KONG — Nam Kee Noodles is a typical Hong Kong eatery: functional, popular and busy. A dozen plastic-topped tables offer room for about 40 patrons, who line up outside at lunchtime to consume spicy noodle soup, dumplings and iced soy milk amid the clatter of plastic bowls and chopsticks.

In April, however, the little restaurant in the heart of Causeway Bay, one of Hong Kong’s busiest shopping districts, nearly had to shut down after the landlord tripled what was an already expensive rent.

“We were paying around 200,000 dollars a month,” said Au Kei-Hong, the shop’s manager, referring to an amount in Hong Kong dollars equivalent to about $25,800. “But the landlord then increased it to 600,000. It was too expensive. We cannot afford that.”

After frantic negotiations, Mr. Au agreed to a less dramatic — though still steep — increase that has allowed him to stay put for another year.

Others have not been so lucky. Soaring rents have forced at least three other small businesses on the same Causeway Bay street to move or close down in the past few months, and similar tales of woe are commonplace among small businesses in other prime areas in the bustling and crowded city.

Rapid growth and sweeping economic changes have pushed up retail rents in many of Asia’s growing metropolises in recent years. But nowhere have they reached the stratospheric heights that they have in Hong Kong, a banking, logistics and trading hub that is seen by many companies as a testing ground and launching pad for the vastly larger mainland Chinese market.

Hong Kong’s residential property prices have come off their recent highs mainly because of government measures intended to cool demand — but those measures do not affect retail rents.

“It’s a normal phenomenon for small retailers to be squeezed out by high rents. It happens everywhere,” said Joe Lin, executive director of retail services at the real estate services firm CBRE in Hong Kong. “But in Hong Kong, the pressures have become very severe in the last two to three years — it’s very unhealthy. Luxury and jewelry now dominate 90 percent of the space in prime locations. The whole trade mix in some of these areas has changed.”

Causeway Bay, where Nam Kee Noodles is struggling to survive among high-end clothing and watch retailers, commands the most expensive retail rents in the world: an average of 1,950 dollars per square foot per month, according to an update on first-quarter figures for this year from Cushman Wakefield, a real estate consulting firm.

Two other Hong Kong neighborhoods, Tsim Sha Tsui and Central, also rank among the top five most expensive locations in the world — along with Fifth Avenue and Times Square in New York — easily topping luxury shopping destinations like the Champs-Élysées in Paris and the Ginza in Tokyo.

That has squeezed out many of the colorful mom and pop stores — hardware shops, fruit stalls, herbal medicine vendors, restaurants — that form a large part of Hong Kong’s business ecosystem, changing the face of many neighborhoods in the process.

A few minutes’ walk from Central, which is home to Hong Kong’s financial district, Ngau Kee Food Café, which for many years sold traditional Cantonese dishes to diners perched on rickety stools, shut down in April after the landlord raised the rent from 49,000 dollars to 120,000 dollars per month.

The restaurant’s owner, Mak Ping-Kuen, is hoping to open up again in another part of town but has struggled to find a new site.

“I hope we can reopen as soon as possible. My customers are getting impatient,” he said.

Nearby, two popular bars in the SoHo district have closed in the past few months, again because the owners could not afford big rent increases.

And Tsui Yuen Desserts, which sold delicacies like ginger-flavored milk custard and sweet black sesame soup for less than 20 dollars a bowl, had to relocate from Causeway Bay to Wan Chai, a neighborhood more geared to nightlife than to hungry tourists.

Article source: http://www.nytimes.com/2013/07/04/business/global/soaring-rents-in-hong-kong-push-out-mom-and-pop-stores.html?partner=rss&emc=rss

Square Feet: Rise of World Trade Center Spurs a Retail Revival

Average asking rents in the financial district corridor along Broadway from Battery Park to Chambers Street rose 36 percent to $184 a square foot since spring 2010, with much of that gain taking place since last fall, according to a report issued by the Real Estate Board of New York.

Asking rents grew faster by far along that slice of Broadway — currently largely leased by banks, restaurants and cellphone stores — than any other neighborhood in Manhattan in that period. In the larger area of downtown in general, average retail asking rents grew by 2 percent since spring 2010 to $103 a square foot, while overall Manhattan retail rents grew by only 1 percent.

“Until there was a glimmer that the rebuilding was well on its way, retailers didn’t want to risk it,” said Michael Slattery, a senior vice president of the real estate board. “You wanted to get in early, but you didn’t want to get in too early, because you wouldn’t be able to sustain yourself without significant foot traffic or activity.”

Activity has been picking up. Between 2008 and 2010, the number of visitors to Lower Manhattan grew to nine million from seven million, according to the Downtown Alliance, the local business improvement district, while the residential population has more than doubled since 2000, to 56,000 from 22,904.

Buildings like 7 World Trade Center and the new Goldman Sachs headquarters, along with the recent decision of Condé Nast to move about 5,000 employees to 1 World Trade Center as its anchor tenant in 2014, are ensuring there will be no ebb in the number of office workers walking the streets at lunch and after work hours, he said.

“My sense is that there was always a pent-up demand to return downtown to take advantage of emerging residential, the presence of commercial, and to try to capture that activity that was in the Trade Center itself,” Mr. Slattery said. “That pent-up demand is starting to emerge.”

Some national and international retailers that have opened in Lower Manhattan in the last two years include the global suit maker My.Suit, the men’s clothier Jos. A. Bank and the watchmaker Tourbillon, said Elizabeth H. Berger, the president of the Downtown Alliance.

If retailers’ hesitation to set up shop in Lower Manhattan was once a result of the area’s lack of foot traffic on evenings and weekends, now it is more likely to have its roots in uncertainty about which of its thriving market segments to serve, brokers said. That may be one reason there are so many restaurants on downtown’s heavily trafficked corridors, like Broadway, said Robin Abrams, an executive vice president of the Lansco Corporation, a commercial brokerage.

“Food appeals, obviously, to all those different customers, whether it be locals or tourists, guys going to work, going home — they’re all frequenting the food tenants,” she said.

She said she thought many retailers were still waiting to see what would happen to the World Trade Center development. Before 9/11, the trade center had about 430,000 square feet of retail space along its concourse. Since its loss, retailers have been scattered throughout downtown, with some pockets beginning to develop more of a retail identity, Ms. Abrams said.

For instance, in 2006, Hermès, the luxury goods company, made a foray to 15 Broad Street near Wall Street, and it was quickly joined by other upscale retailers like Tiffany Company, Thomas Pink and Canali, and asking rents quickly climbed to $300 a square foot for ground-floor space.

The 2008 financial crisis upended that trend, though Ms. Abrams said the area continued to attract luxury retailers, at “more realistic” rents.

The 360,000 square feet of retail to open in 2014 at the World Trade Center site will not be as centralized as it was in the concourse mall, but will be distributed throughout the site, stretching from the World Financial Center as far as the new Fulton Street transportation hub. Even so, retailers are lining up to lease the space, said Darrell Rubens, a senior managing director at the retail brokerage Winick Realty Group.

With retailers jostling to locate as close to the World Trade Center site as possible, Brookfield Office Properties announced plans in June to improve and expand retail offerings in about 180,000 square feet of retail space at the World Financial Center, just west of the World Trade Center site, as part of a $250 million upgrade of the four-building complex.

Just east of the World Trade Center site, at 22 Cortlandt Street near Broadway, the discount department store Century 21 announced plans in June to add 76,000 square feet of retail space, which would include a cafe, dressing rooms and bathrooms, to the 120,000 square feet it already occupies.

Another closely watched space is 32,000 square feet at 100 Broadway between Pine and Wall Streets that was recently vacated by the bookseller Borders. “Whoever takes that space will help define how Broadway trends,” Ms. Abrams said. “It would be fabulous if an HM or a Topshop or a big apparel tenant takes that piece, as it will lead others to want to be on that corridor.”

Madison Capital, a real estate investment and operating company focused on repositioning assets, acquired 100 Broadway in late 2010 anticipating that Borders would be closing and that retail downtown would continue to develop, said J. Joseph Jacobson, a partner.

“We think it’s an incredible location, given the growth in Lower Manhattan,” he said.

The multilevel space, which has 200 feet of frontage on Broadway and 30-foot ceilings, could be used by one large tenant or divided for two or three users, said Gene P. Spiegelman, an executive vice president at the commercial brokerage Cushman Wakefield, which is marketing the space.

The asking rents for the ground floor space are $350 a square foot, and the blended asking rent for the entire space is about $110 a square foot, he said.

“The asking rents are targeted above the previous rental range, and, especially with our ground-floor space, we expect to bring back rents to pre-9/11 levels,” Mr. Spiegelman said. He said the space had drawn interest from companies in sectors as diverse as fashion and apparel, finance, fitness, consumer products and food. Many of the companies are strong national retail chains, he said, and the challenge is finding the right retailer or mix of retailers. No tenant has leased the space as yet.

“Currently, Broadway is banks and restaurants,” he said. “It’s more service-oriented right now. But I believe Broadway is going to go more into the fashion and apparel mode, while still maintaining a strong service component.”

Article source: http://feeds.nytimes.com/click.phdo?i=f540c708ceaf8266b10a0ea61cb52272