Shoppers walk with their luggage on Russell Street at the Causeway Bay district in Hong Kong. Russell Street, which had recorded the world’s highest retail rents, lost top spot to New York’s Fifth Avenue, according to broker Cushman & Wakefield.

Bloomberg
Hong Kong



A store rented by Jaeger-LeCoultre in Hong Kong’s Russell Street, once the world’s most expensive strip for retail rents, will be leased to a new tenant for more than 40% less as the effects of China’s economic slowdown continue to be felt in the city.
Cosmetics brand Colourmix, run by Veeko International Holdings, will rent a 1,000 square-foot space on Russell Street in Causeway Bay for close to HK$1mn ($129,000) per month, 43% lower than what watch brand Jaeger-LeCoultre is currently paying, said Lawrence Wong, a director at property agent Sheraton Valuers, which handled the transaction.
“Landlords have to face the reality no matter how reluctant they are,” Wong said by phone yesterday. “It’s still better than leaving their property empty.” Russell Street, which had recorded the world’s highest retail rents, lost top spot to New York’s Fifth Avenue, according to broker Cushman & Wakefield last November. In a July research report, Jones Lang LaSalle predicted high-street rents will drop 15% to 20% in Hong Kong this year.
In Central, the centre of Hong Kong’s business district, Adidas Hong Kong will lease the space currently occupied by Coach Hong Kong at a rent 23% cheaper, according to Land Registry data. The sports brand will take up the property for HK$4.34mn a month, down from the HK$5.6mn that Coach is paying.
Retail rents dropped 12% in Causeway Bay and 3% in Central, as of the end of June, Oriental Daily reported earlier this month, citing data from CBRE Group. The broker said in a report that the decline came after rents for shops at prime locations in Hong Kong’s four shopping districts, including Tsim Sha Tsui and Mong Kok, increased by 213% from 2003 to 2014.
Hong Kong’s retail property market has slumped as China posts its weakest growth in a quarter century. The world’s second-largest economy will announce a growth objective of 6.5% to 7% for 2016, according to eight of 15 economists in a Bloomberg News survey conducted on September 17-22. All of those surveyed said they expect next year’s target will fall short of the about 7% set by Premier Li Keqiang for 2015 growth.
The city’s residential market also is experiencing weaker sentiment. “Housing market outlook will likely become more cautious amid increased volatility in the global and Hong Kong’s financial markets,” the Hong Kong Monetary Authority said in a report released on Friday. “The risk of downward adjustment has picked up steadily.”