As the Wall Street Journal documented this week, the Swedish fast-fashion giant’s 3,000 sqm store will close in fall 2013 due to the rent increase. While the price of the downtown location proved too rich for H&M, however, the company’s rival Zara, was quick to lease the space for approximately US$1.4 million in monthly rent after H&M failed to reach an agreement with their landlord.
According to CBRE, Hong Kong has the world’s highest retail rents, and rates have jumped 19% since 2011. And this trend is not confined to Hong Kong.
Despite a recent slowdown in China’s overall economy, the outlook for retail spending is still expected to rise to about 45 percent of GDP by 2015 (compared to 36 percent in 2011), and this is expected to keep retail rents moving upwards on the mainland.
CBRE’s Head of Research for Asia Pacific, Nick Axford recently was interviewed on CNBC, where he noted, “There has been some weakness in luxury retail sales across China. (But) what investors and retailers are really focused on, is the strategic, long-term growth in middle, upper-level incomes and more disposable incomes from middle class families.”
“That’s going to drive huge demand for consumer goods not just at the luxury end but the mass market end also. And that’s what many of the retail groups are looking to target and that’s why investors are seeing opportunities in that more modern shopping mall space,” he added.
In Shanghai, property consultancy Savills reported that retail rents in prime areas of the city grew by 1.7% in the second quarter of 2012.