November 09, 2005

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Causeway Bay or Champs Elysees?

You decide. Which would you rather stroll down and around to do your shopping? Well, reality-check time: Causeway Bay's retail space is more expensive than the Champs Elysees or anywhere in Paris for that matter (the Champs-Elysees is not my favorite shopping area in the French Capital, but I'd certainly take it to the unregulated chaos of CWB).

I suppose in Hong Kong, which, when you take out all designated park land, is the most densely packed place on earth, space comes at a premium. But what a premium! The linked article in the International Herald Tribune leads with an old story, of how Dublin Jack's on Cochrane Street was forced to close when its rents were doubled from HK$140,000 a month to HK$280,000 a month. I also found out that the retail space on the ground floor of Chungking Mansions on Nathan Road is going for HK$350,000! That's a lot of cash per cockcroach. No wonder only those triad-run electronics shops of the bait & switch technique do well there.

The greed of retail space owners has no bounds in Hong Kong. They also have no long-term vision. It is truly terrifying what effect they have on neighborhoods. An example - the Ho Man Tin area I grew up in used to have many restaurants and charming shops on Waterloo Road. Then retailers jacked up prices just before the Crisis in 1997, so only real-estate agencies peddling their sorry retail spaces could afford it. Then after the crisis, the property agencies went bust too. For awhile there were few shops on my road, ecept for the 'bare concrete walls' variety where they sell everything for HK$10. The nice restaurants never came back - they had to move on from a business with such fluctuations in cost.

What will this mean? It'll mean that restaurants in Hong Kong will go back to being mediocre, cost-driven enterprises with no sense of customer service. I understand the retailers feel like it's finally their time after 8 long years, but doubling rents, really - a litle moderation please!

posted by HK Dave on 11.09.05 at 08:17 AM in the Hong Kong economy category.


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I'll respectfully disagree, Dave. If landlords are so short-sighted they choose to double or triple rents, that's their right. Either someone who can justify paying that rent will fill the space or it will lay empty, at a cost to the landlord. With the notable exceptions of heritage and public buildings, that's the way it should be. You can't outlaw stupidity, yet.

A packed CWB is testament to the high value of retail shops there. It's packed because that's where the shops are, and the shops are there because it's packed. Everyone wins.

posted by: Simon on 11.09.05 at 09:54 AM [permalink]

Real estate is a "tax" in HK.

you can compare this with 'tax and social security' in the west. the difference being the drivers for such 'tax' calculation.

i am not sure if i can say whether this is good or bad

1. simple and easily run (for inland revenue)
2. encourage efficient use of space and hig volume biz (why McD is profitable despite low price)

1. land area is not necessarily the best measure for tax
2. compromised quality of liffe unneccessarily
3. encourage bubble in property market

posted by: sun bin on 11.09.05 at 10:14 AM [permalink]

No, you're right Simon, it is their prerogative to increase rents. I am not suggesting any official rental cap at all - I am very much against rent control. I am more decrying their short-sightedness, because when their tenants dry up again during the next downturn (which may come soon), they won't have any stable, long-term tenants again. They don't seem to be willing to learn lessons, or to create voluntary street- or neighborhood-based associations that suggest how much rents should go up or down. Those associations, around the world, tend on average to be more sensible about jacking up rents without wiping out their golden-egg laying geese!

I am also suggesting that tourists with a choice of international shopping venues may start thinking twice about coming to shop in districts where your inhalations are limited by the crowds around you...

Sun, I agree with you, that's why Hong Kong's middle class pay tax rates of about 50% when you add in their bank property payments...

posted by: HK Dave on 11.09.05 at 11:08 AM [permalink]

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