Hong Kong-listed fashion brand Esprit Holdings will not renew the lease for its flagship store in Causeway Bay, according to local media reports.
The lease for the 7,000 square foot (650 square metre) store in Leighton Centre at 77 Leighton Road will expire in June. Hysan, the owner of the commercial complex in Hong Kong’s priciest shopping district, had been leasing the G13 and G14 shops to the fashion brand for a monthly rent of around HK$2 million ($254,862) since 2014.
Esprit Shifting Leasing Strategy in Home City
Raymond Or, chairman of the fashion merchandiser, said that cost saving is not the sole reason for the move. The company also considers the location and size of the store when leasing, he added. “A large size [for a store] might not bring about good results,” Or told Apple Daily.
“Esprit may be shifting its location strategy to more mall-focused and in form of smaller shop size,” said Cathie Chung, National Director of Research in JLL during a phone interview with Mingtiandi. “As compared to street shops, shopping malls tend to have a more balanced trade mix and guaranteed foot traffic, so it is more likely for Esprit to enjoy spillover benefit from complementary tenants. Promotion activities by malls can also attract shoppers.”
Hysan was reported earlier this month to be marketing the property to potential tenants seeking the same amount of rent that Esprit had been paying.
Causeway Bay Rents Fall By 53%
Retail shop owners in Causeway Bay, Hong Kong’s prime shopping district, have been suffering through a tough season. In the last quarter, shop rents in the prime retail district are down by 53 percent from their peak in the fourth quarter of 2014, according to Chung.
“In the past two to three quarters, we have seen more tenants adopting cost-saving initiatives in core submarkets like Causeway Bay and Central,” said Chung. “While owners’ stance is rather soft, making room for rent negotiation.”
Last month, fashion brand Twist leased a two-storey shop at 24-26 East Point Road in Causeway Bay for 56 percent less than the HK$1.1 million monthly rent that the previous tenant had been paying, according to press accounts.
Meanwhile, Russell Street, once the most expensive retail street in the world, has also seen rent cuts. Last week, Swatch Group was able to renew its lease for a street front shop at 38 Russell Street at a rate some 33 percent than the HK$1 million per month specified when it signed its previous lease three years ago.
Esprit Deals With HK$1B Loss
Esprit’s retreat from Causeway Bay might be a reflection of financial challenges that the fashion brand is currently facing. The Hong Kong-based firm reported a net loss of HK$ 954 million in the second half of 2017.
“Interim results of the group are below our expectation, mainly due to weaker than expected sales performance of our brick and mortar retail stores in the second quarter of the financial year, where we observed decreased customers traffic,” Jose Manuel Martínez, CEO of the group said in a press conference in late February, as cited by Fashion United.
Just last week Esprit founder Michael Ying sold an industrial plot in Kwun Tong to speculator Hugo Lam for HK$1.6 billion. The 22,000 square foot site sits at 41 King Yip Street in Kwun Tong.