2010 was the Year of Tsim Sha Tsui with a number of new and exciting retail developments opening for business including 1881 Heritage, K11, iSquare and The One.
We believe that 2011/12 will be the Year of Causeway Bay, because for the first time in many years the district is set to witness substantial changes. “The area will undergo a burst of development with the refurbishment of the Leighton Centre and One Hysan Avenue and the redevelopment of Hennessy Centre (to be renamed Hysan Place), all of which will give more market focus to Causeway Bay and further strengthen the positioning of the location, in particular to the south of Hennessy Road,” said Nick Bradstreet, Head of Leasing of Savills.
This part of Causeway Bay is emerging as a trendy up-and-coming new zone with an influx of fashionable international brands and their flagship stores. Forever 21 will open their first Hong Kong store in Capitol Centre in early Q4/2011. After refurbishment the Leighton Centre will be home to G-Star Raw’s 7,000 sq ft flagship store and a number of fashionable casual brands while I.T., Hong Kong’s multi-label fashion giant, has pre-leased approximately 30,000 sq ft over four levels of One Hysan Avenue. The arrival of these high-street retailers and new attractions will have a positive impact on neighbouring streets, such as Percival Street (the section close to One Hysan Avenue), Lee Garden Road, Lan Fong Road, Pak Sha Road and Yun Ping Road. Some of these streets have already benefited from the recent pedestrianisation scheme and now enjoy a higher pedestrian flow. We expect these new arteries to gentrify and offer a broader tenant mix in the near future.
Shops on Russell Street (the western section opposite Times Square), which have commanded the highest rents in Causeway Bay since 2003, will remain the strongest prime location and with only a handful of owners, the quality of the trade and tenant mix should be maintained. Prime street shop rents on Russell Street have risen by 34% year-on-year over Q1/2011. Further rental growth is expected towards the end of the year when a number of existing tenancies come up for expiry. A couple of acquisitions for owner occupation have further tightened the availability of retail premises in this highly sought-after location. Strong leasing demand has already spilled over to adjacent areas, including the eastern section of Russell Street (between Lee Garden Road and Percival Street).
Upon completion of Hysan Place in mid-2012, the key retail precincts to the north and south of Hennessy Road will merge. Together with The Lee Gardens complex in the southern part of the district, these three key retail nodes will form a stronger retail hub and help to revitalise the surrounding area. Nick further added that “this will become Causeway Bay’s ‘Golden Triangle’. Comparable to successful international examples such as Covent Garden and Carnaby Street in London, the strengthening of the area will benefit from single ownership of the majority of retail supply as well as extensive pedestrianization.” Across Victoria Harbour in Tsim Sha Tsui, Canton Road has fast become the ‘Golden Mile’ of Hong Kong’s retail scene and will remain the most popular destination for both retailers and tourists this year. Landlords in the area are in a very strong position and tenants are facing rent increases of more than 50% as three-year leases are renewed. This may cause some retailers to rethink operational strategies and relocate to secondary locations or into major malls. Prime street shops are now dominated by jewellery and watch retailers and some super luxury international brands, which enjoy a relatively higher profit margin and can afford the rents. We forecast overall prime street shops will rise by 10 to 15% over the remainder of 2011.