Hong Kong is famous for being (one of) the most expensive market in the world when it comes to commercial renting. Some shops located on Canton Road, TsimShaTsui -- considered prime location for luxury retail -- can reach over HK$6 million per month. At this price, most brands already gave up the idea of profit and simply use these stores to hold their brand's reputation.
In the recent years, traditional stores and restaurants have shut down, one after the other, under the pressure of rents always increasing. Each empty space quickly filled by luxury retailers. A short walk on Nathan Road in TsimShaTsui resembles more and more a visit in Jewelry-land. It seems that nowadays only the luxury industry can still afford such ridiculous rents.
But what would happen if even this industry could no longer bear the price?That is what Hong Kong is about to find out.
Following the drop of Swiss Franc and the low level of Euro, general prices in Europe have been decreasing significantly. In the same time, Hong Kong currency being based on US dollar hasn't moved. Consequently, the flow of Chinese visitors coming to spend their savings in Hong Kong has been redirected toward Europe where their purchasing power keeps rocketing.
Not to mention that mainland tourists are not the most loyal: not always warmly welcomed by Hong Kong citizens, they are certainly glad to bring their money elsewhere.
As a result, watch retailers associations might soon put pressure on large groups to lower their prices and align them with Europe. In a sector where customers refuse to pay outrageous prices and landlords keep their rents sky-high, the future doesn't look too bright.
Are we reaching the limits of the system? Is the Hong Kong real estate bubble about to explode?
The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Hongkong Business. The author was not remunerated for this article.
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Julien Rio has been working in the field of web development and web marketing for over five years in both Asia and Europe.