Staff members are seen in a Louis Vuitton store in the Times Square shopping mall in the Causeway Bay district of Hong Kong on January 4, 2020. Luxury brand Louis Vuitton is closing a major store in high-end Hong Kong shopping center Times Square often targeted by democracy protesters, local media reported. (AFP/Philip Fong)
In an almost deserted mall, the few shoppers hurry past wearing face masks. In the luxury stores, sales assistants, also in masks, outnumber customers -- if they have any at all. To pass the time, staff chat with each other or play with their phones.
This isn’t a scene from some dystopian movie. Instead, it’s Tuesday afternoon in Hong Kong’s usually bustling Times Square, a 17-floor mega-mall in the heart of Causeway Bay, home to the world’s most-expensive retail strip.
The stylish displays of Gucci and Louis Vuitton advertisements usually compete for the attention of wealthy Chinese tourists, who until early last year swarmed the city for quick shopping expeditions. Now, no more.
Already reeling from months of anti-government protests that at times broke into pitched street battles between demonstrators and police -- scaring off tourists -- the outbreak of coronavirus has dealt a second, crippling blow to retailers.
Mainland Chinese visitors, who used to come to Hong Kong to buy everything from luxury watches to discount cosmetics, plunged 53% in December from a year earlier. That’s set to fall even further after the government said it will start to quarantine people arriving from across the border.
On top of that, local residents are now reluctant to go out amid fears of catching the deadly virus. The number of confirmed cases in the city climbed to 22 as of Thursday evening, with some of those likely to have been infected locally.
“Many retailers are saying it’s a disaster,” said Nicholas Bradstreet, managing director of leasing at Savills Plc. “In the last 10 days, their sales have been down 70 percent to 80 percent week-on-week. There’s very little traffic into the shops” particularly in key retail districts like Central, Causeway Bay and Tsim Sha Tsui, he added.
La Perla, Burberry
Times Square fronts Russell Street, where at US$28,713 per-square-meter a year, retail rents top salubrious addresses like New York’s Upper 5th Avenue ($23,549) and the Champs Elysee ($15,473), according to Cushman & Wakefield Plc.
The strip is usually thronged by thousands of shoppers hitting upmarket stores like Burberry, La Perla and Audemars Piguet. Not this day though. Two employees at an Omega boutique stare into space as pedestrians walk by without a glance at the watches on display.
Further down the street sits an empty Prada store. The high-end Italian fashion retailer quit its HK$9 million ($1.2 million) per month lease at the site four months early, according to the Hong Kong Economic Journal.
“Causeway Bay is very quiet now. It used to have a lot of traffic,” said Wong, a salesperson at a fashion boutique in a mall near Lockhart Road who declined to give her first name because she isn’t allowed to talk to the media. “With the scarcity of face masks, people would rather not go out at all.”
Retail sales plunged 19 percent in December, the 11th straight monthly decline. The slump in consumer spending has helped drive the economy into recession for the first time in a decade.
The retail downturn is also putting the squeeze on landlords. Rents in Causeway Bay dropped 8.5 percent in the fourth quarter versus the previous three months, resulting in a full-year decline of 14 percent, according to Cushman & Wakefield.
Mall owners including Times Square’s Wharf Real Estate Investment Co. will face pressure to offer rent concessions, according to Phillip Zhong, a senior equity analyst at Morningstar Investment Management Asia. Wharf’s rental income will fall about 2 percent this year, Zhong estimates.
Link REIT, Hysan
The property company’s shares have slumped 14.6 percent since Jan. 20, when the virus began to spread more broadly.
Shares of other mall owners have also suffered. Link REIT, the city’s biggest mall owner, is down 6.1 percent while Hysan Development Co., which owns retail and office space throughout Causeway Bay, has dropped 5.2 percent.
Singapore-based Mapletree North Asia Commercial Trust, whose Festival Walk mall was trashed during protests last year, has fallen about 5 percent.
The only retailers in demand at the moment are drug stores. On Lockhart Road, just a 10-minute walk from Times Square, shoppers queue to snap up face masks and hand sanitizer, which are now in short supply across the city.
Sky Fan, who runs a neighboring electronics-gadget store, can only look on in envy. The coronavirus outbreak has taken a bigger toll on spending than the protests did, he said, with sales after Lunar New Year down about 50 percent.
“You can see that many people outside are just hunting for masks and cleaning products,” Fan said.
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