Hong Kong can no longer lay claim to the world's most expensive shopping district after losing that crown to New York amid an economic slowdown and an ongoing lack of international visitors due to Covid-19, according to global real estate company Cushman & Wakefield.
Manhattan's upper Fifth Avenue displaced Hong Kong's Tsim Sha Tsui district on the company's first top 10 ranking since 2019. Via Montenapoleone in Milan ranked third.
The average rent on upper Fifth Avenue surged 14% to US$2,000 per square foot in the third quarter, compared with pre-pandemic levels, while Tsim Sha Tsui dropped 41% to US$1,436 per square foot over the same period, according to the report, which has tracked retail rents by district across 92 cities since 1988.
Tsim Sha Tsui saw rents decline 5% year on year as retailers in the city struggled amid Covid-19 restrictions and depressed visitor numbers while the border with mainland China remains closed.
Rents in Hong Kong's other major shopping district, Causeway Bay, fell 7% over the past year and 49 per cent since before the pandemic to US$1,292 per square foot, according to the report. This puts Causeway Bay in second place in Asia-Pacific behind Tsim Sha Tsui. The district does not appear in the global top 10 as Cushman only lists one district per city.
"Vacant shops prevail in Hong Kong's two traditional shopping districts as mainland tourist arrivals in Hong Kong are still at a very low level," said Kevin Lam, Cushman's executive director and head of retail services in Hong Kong.
Overall, high-street rents remain under pressure even though the rental correction trend is stabilizing, Lam said.
"Against the backdrop, we have seen a change of the trade mix in prime retail locations," Lam added, citing a transition in Causeway Bay from luxury retailers to shops catering to lifestyle needs and local spending.
Four other Asia-Pacific shopping districts appear in Cushman's top 10: Tokyo's Ginza (sixth), Sydney's Pitt Street Mall (eighth), Seoul's Myeongdong (ninth), and Shanghai's West Nanjing Road (10th).
Globally, average rents in the world's major retail markets have recovered to 6% below pre-pandemic levels as of the third quarter of 2022, the report said. Though the Asia-Pacific region has yet to rebound, its rents recovered slightly from the lowest level and are 12% below the pre-pandemic level.
"Countries in Asia-Pacific took a more stringent approach for inbound travel and some of them are more reliant on domestic consumption," said Rosanna Tang, Cushman's executive director and head of research in Hong Kong.
Hong Kong's retail market remains weak, with total retail sales falling 0.1% year on year to HK$28.6 billion (US$3.7 billion) in August, according to a late October report from Knight Frank.
"With the various pandemic regulations still in place, such as the use of the LeaveHomeSafe app, social distancing rules, and the prohibition of large group gatherings, we urge the government to ease most, if not all restrictions, as they are seriously hindering social and economic activity," Knight Frank analysts led by Martin Wong said. "We believe a significant relaxation of the Covid-19 protocol will allow society to return to normal while still remaining vigilant, thereby improving local consumption sentiment and boosting retail sales."