Amidst a shift in Hong Kong’s retail landscape that has seen values of prime shops plunge 60 percent from their peak a decade ago, investors have the opportunity to create places that earn visitors and generate returns by fusing art and culture with experiential-focused concepts, industry veteran Ben Cha told Mingtiandi’s Hong Kong Forum on Tuesday. Watch the full recording>>
Cha, who launched Hong Kong-based investment firm Serakai Group in December to invest in retail properties in major gateway cities in Asia, sees the arts and cultural attractions as a way to foster communities and create compelling retail destinations that achieve appealing returns.
“We are led by a philosophy of placemaking,” said Cha. “We are focused on retail – specifically discretionary retail. We also have our own product concept, which is mixed-use, multi-purpose space that is anchored by art and culture. We really focus on making vibrant, exciting, successful destinations. That’s our philosophy of placemaking.”
With an initial focus on Tokyo and Hong Kong, Serakai is targeting both value-add and development strategies and Cha hopes to announce the company’s inaugural acquisition by the end of this year – most likely in the Japanese capital.
Hong Kong Retail Revamp
Speaking at the event, which was sponsored by Yardi, Cha pointed to public tastes for arts and culture as indicators of consumer preferences and barometers for trends in discretionary retail, which form key inputs in Serakai’s product concept.
Ben Cha sees placemaking as critical to profitable projects
“We very much see art and culture as upstream from retail,” said Cha. “It gives us insights into tenant trends, tastes, preferences, aesthetics, et cetera. And certainly in a market like Hong Kong, the art and culture scene, the art auction sector as part of the Hong Kong economy has been resilient amidst the many challenges that the markets face.”
Cha pointed to the resiliency of the arts and culture ecosystem amid Hong Kong’s economic downturn, citing examples such as the M+ contemporary art museum in the West Kowloon Cultural District, the decision by leading auction houses Christie’s and Sotheby’s to set their Asia Pacific headquarters in the city, and the success of Art Basel Hong Kong, which drew 242 exhibitors this year and recorded some seven-figure sales.
As Hong Kong’s conventional retail market continues to face a bumpy post-pandemic recovery, Serakai sees a window of opportunity amid the valuation reset to enhance retail property returns with experiential-driven concepts and amenities, mirroring the shift taking place in the city’s office sector.
“We know it’s an out-of-favor or contrarian view, but we see opportunity as the Hong Kong retail market is beginning to reconstitute itself,” said Cha. “What’s the offering? It has to be experiential, as retailers will tell you. The office offering has to be experiential. The amenities have to be there. That’s even more so the case in the retail sector. So as the Hong Kong retail sector is reconstituting itself, figuring out what is the offering and how can we make it better, different, more fun, experiential, vibrant…we see that window of opportunity, if not already opened, opening further in the coming period of time.”
Tokyo Opportunities
Beyond its home base in Hong Kong, Serakai is also studying acquisitions in the Asian retail mecca of Tokyo, with the Japanese capital’s status as a top tourism, shopping, and cultural destination creating opportunities for experiential retail concepts.
“Tourists from all over Asia, they’re not just going once a year to Tokyo, they’re going perhaps two or three or four times a year,” said Cha. “So a lot of the same demand drivers for lodging and hotels and living in Japan absolutely feature even more strongly in the retail sector. People just love to shop in Tokyo. And that’s certainly one of the reasons why we’re very, very interested in the Tokyo market.”
Cha cited a Japanese stadium-led project centered around a baseball team as an example of an experiential-led retail opportunity, and also named Bangkok and Seoul as cities with potential for arts and culture-anchored discretionary retail projects.
With over 20 years of experience sourcing and executing real estate investments for organisations including the UK’s Grosvenor Group, UBS, and Hong Kong-based developer HKRI, Cha and his team aim to tap their collective experiences to create value in the discretionary retail property market.
“I would certainly like to think that what I’m doing now is a culmination of the lessons learned from each of those different parts of my career,” said Cha. “A lot of the work that I’m doing now and a lot of this perspective on placemaking is a continuation of things that I’ve done earlier in my career.”
An Interview in Pictures
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