A drop in Chinese tourist numbers is driving down shop rentals in Hong Kong, with vacancies increasing in the same prime areas that just three years ago passed New York’s Fifth Avenue to become the world’s most expensive retail real estate.
Spooked by cross-border tensions and pro-democracy protests beginning last year, tour groups visiting Hong Kong from China plunged by about 80 percent this month, dealing a blow to retailers who built their businesses on the visitors’ once insatiable demand.
A Chinese government crackdown on lavish spending, which shows no signs of letting up, has also encouraged tourists to shop further away from home, just as drops in the yen and the won make Japan and South Korea more attractive destinations.
That has further dimmed the appeal of Hong Kong’s Causeway Bay, where renting a 46m2 space — the size of a school classroom — can cost HK$500,000 (US$64,481) per month.
“If they do not cut the rent, I will leave,” said the head of a consumer goods chain that has a shop in Causeway Bay.
Revenues have fallen by 30 percent over the past year as the number of Chinese visitors fell by half, he said.
“We cannot bear the costs,” he added, declining to be named as he did not want to highlight his company’s financial situation.
Hong Kong retail sales in January fell to their lowest since 2003, which prompted more retailers to negotiate lower leases or move out, property agents said.
The sales decline also coincides with plans by several luxury retailers, including Chanel and Compagnie Financiere Richemont SA’s Cartier, to cut prices in Asia to counter the plunge in the euro.
“Their businesses are not doing so well, so they decided to essentially hand the keys back to landlord,” said Tom Gaffney, head of retail at property consultancy Jones Lang LaSalle.
Property consultancy Savills said average prime street shop rentals last year fell 8.5 percent year-on-year, as the number of Chinese tourists began to fall.
This year, a luxury goods retailer in Causeway Bay managed to negotiate a 15 percent discount on its lease, while another retailer renewed their contract at the same terms, a property agency involved in the deals told reporters.
The slowdown is forcing many retailers to adapt.
Paul Tang (鄧子強), the owner of a tiny shop in the heart of Causeway Bay, said sales of his eclectic mix of banned Chinese books and milk powder fell 25 percent this year, forcing him to courier goods to clients in China.
“It is no use sitting in my shop and crying,” he said.
A possible restriction by authorities on multiple daily visits to Hong Kong could further add to the pressure on landlords more exposed to the retail market, such as Hysan Development Co Ltd (希慎集團), Wharf Holdings Ltd (九龍倉) and Sun Hung Kai Properties Ltd (新鴻基地產).
China has claimed a breakthrough in developing homegrown chipmaking equipment, an important step in overcoming US sanctions designed to thwart Beijing’s semiconductor goals. State-linked organizations are advised to use a new laser-based immersion lithography machine with a resolution of 65 nanometers or better, the Chinese Ministry of Industry and Information Technology (MIIT) said in an announcement this month. Although the note does not specify the supplier, the spec marks a significant step up from the previous most advanced indigenous equipment — developed by Shanghai Micro Electronics Equipment Group Co (SMEE, 上海微電子) — which stood at about 90 nanometers. MIIT’s claimed advances last
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has appointed Rose Castanares, executive vice president of TSMC Arizona, as president of the subsidiary, which is responsible for carrying out massive investments by the Taiwanese tech giant in the US state, the company said in a statement yesterday. Castanares will succeed Brian Harrison as president of the Arizona subsidiary on Oct. 1 after the incumbent president steps down from the position with a transfer to the Arizona CEO office to serve as an advisor to TSMC Arizona’s chairman, the statement said. According to TSMC, Harrison is scheduled to retire on Dec. 31. Castanares joined TSMC in
EUROPE ON HOLD: Among a flurry of announcements, Intel said it would postpone new factories in Germany and Poland, but remains committed to its US expansion Intel Corp chief executive officer Pat Gelsinger has landed Amazon.com Inc’s Amazon Web Services (AWS) as a customer for the company’s manufacturing business, potentially bringing work to new plants under construction in the US and boosting his efforts to turn around the embattled chipmaker. Intel and AWS are to coinvest in a custom semiconductor for artificial intelligence computing — what is known as a fabric chip — in a “multiyear, multibillion-dollar framework,” Intel said in a statement on Monday. The work would rely on Intel’s 18A process, an advanced chipmaking technology. Intel shares rose more than 8 percent in late trading after the
FACTORY SHIFT: While Taiwan produces most of the world’s AI servers, firms are under pressure to move manufacturing amid geopolitical tensions Lenovo Group Ltd (聯想) started building artificial intelligence (AI) servers in India’s south, the latest boon for the rapidly growing country’s push to become a high-tech powerhouse. The company yesterday said it has started making the large, powerful computers in Pondicherry, southeastern India, moving beyond products such as laptops and smartphones. The Chinese company would also build out its facilities in the Bangalore region, including a research lab with a focus on AI. Lenovo’s plans mark another win for Indian Prime Minister Narendra Modi, who tries to attract more technology investment into the country. While India’s tense relationship with China has suffered setbacks