The title of a recently released Bloomberg article is “Hong Kong Businesses Vanish as Rents SOAR: Real Estate” (Web-site/URL: http://www.bloomberg.com/news/2013-04-01/hong-kong-businesses-vanish-as-rents-soar-real-estate.html).
“Over the past decade, car-repair shop owner Benny Chan has seen more than 70 percent of his small-business peers disappear as his Hong Kong neighborhood fills up with HIGH-END Western bars and Japanese restaurants”. “high-end”, of course, implies EXPENSIVE.
More specifically, Chan, “who’s been in business since 1985 in the Tai Hang area, just east of the RITZY Causeway Bay shopping district”, said: “Rents here are GOING UP MULTIPLE times. WE’LL ALL BE OUT OF HERE in the next FOUR to FIVE years”. Most of these people are SMALL BUSINESS OWNERS. HOW ARE THEY GOING TO SURVIVE? Of course IT’S UNCLEAR IF people like Chan will be able to find the same opportunities they have now if they have to re-locate.
According to Joe Lin, “Hong Kong-based senior director for retail services at CBRE Group Inc. (CBG)”, “There’s only A LIMITED SUPPLY of good spots and the rents are SUPER high” in major shopping districts”, “a limited supply”, or more accurately “a limited” QUANTITY SUPPLIED (using fundamental economic principles), of course, will lead to HIGHER PRICES. “It’s natural that restaurants and some retailers would find these fringe areas with an equally HIP, HIGH-SPENDING crowd more attractive” obviously because companies want to MAXIMIZE PROFITS.
According to Soundwill Executive Director Dickson Lau, “referring to Tai Hang’s proximity to Causeway Bay”, “(speaking) in an interview at the clubhouse of the 37-story tower”, “It’s only a 15-minute walk from the world’s MOST EXPENSIVE shopping location. With all the NEW RESTAURANTS AND APARTMENTS, there’ll be a HUGE upgrade in the standard of living in this area”.
“To the west of Hong Kong’s Central business district, in the historic areas of Sheung Wan, Sai Ying Pun and Kennedy Town, MOM-AND-POP shops are also being pushed” obviously because THEY CAN’T AFFORD THE HIGH RENTAL PAYMENTS.
According to Jerome Spitzer, “whose METROPOLITAN restaurant in Sai Ying Pun replaced A NEIGHBORHOOD GROCERY in March (2013), adding to his three French restaurants in Central”, “To open here is RISKY, but SO FAR, we’re doing good”. Spitzer, “whose French Creations group also runs a fifth restaurant in Happy Valley near Causeway Bay”. went on: “Business is good IF you’re already an existing operator in Central”. This is the latest IF. “But to open another new one there — the rent is just CRAZY” obviously.
“Monthly rents for ground-level shops in the UP-AND-COMING fringe areas have risen “MULTIPLE times” in the past five years to about HK$40 to HK$60 a square foot, according to Helen Mak, Hong Kong’s head of retail-services at broker Collier’s International (COL)”. Notice “up-and-coming”. Many Hongkongers want to STAY TRENDY/FASHIONABLE.
“Tina Sin, a FLOWER SELLER (vendor) in her 60s who operated a shop in Tai Hang for almost 30 years, was evicted three months ago (December, 2012) after both adjacent stores gave way to a SUSHI restaurant and a BAR“. Of course as we know, we need A LOT of dough to eat at “sushi restaurants” and “bars”. “She found another spot in the area — a 50-square-foot stand with no cover that’s about HALF the size of her original business — at THE SAME rent”. According to Sin, “who has a flower tattooed on her left forearm”, “The new landlord is an old neighbor WHO’S TRYING TO LOOK OUT FOR THE COMMUNITY”. NICE people like these are becoming increasingly hard to find in society these days. “But he also told us that when someone comes in with a good offer for the building, he’ll sell it and THAT’LL BE THE END FOR US”. Again, this is a VERY BAD predicament for a LOW-INCOME person (flower vendor).
“Others weren’t as lucky. Chung Wing-Ho, who ran an automobile-repair shop on the same street as Sin’s old florist spot, moved his business to Sai Wan Ho, near the eastern end of Hong Kong Island, when his landlord DOUBLED the rent to HK$30,000 a month in 2011″. “There wasn’t even room for NEGOTIATION (?)” Given how ANGRY and DISSATISFIED people seem to be right now, this ISN’T surprising. “To DOUBLE the rent basically means ASKING US TO LEAVE. The margin for our business ISN’T very high to begin with“, even though Chung should be in better shape than TINA SIN, THE FLOWER VENDOR. However, Chung is still WORKING class.
“Many properties that aren’t bought by developers are owned by private investors who made their fortunes elsewhere, such as in the MANUFACTURING boom in the 1970s, the STOCK MARKET rally in the 1980s and the real estate SURGE during the past few years, according to Stanley Poon, chief operating officer at the commercial-property arm of Centaline Property Agency Ltd., the city’s biggest closely held realtor”.
“Simon Wong, whose family owns two six-story residential walk-up buildings more than 40 years old in the Sheung Wan district, last year replaced a GROCERY SELLING tenant on the ground floor with A WINE RETAILER, DOUBLING the rent”. More specifically, the 29-year-old Wong, “who helps manage a trading business his grandfather founded almost 40 years ago”. said: ““It’s just EVOLUTION. It’s sad for the old tenant, but we have hardly raised the rent in the past. We’re just CATCHING UP TO THE TREND”. In Hong Kong there seems to be a CRAZE with staying “trendy”.
“Average prime shop rents in Hong Kong may rise 8 percent this year (2013), DOWN from growth of 9 percent a year earlier (2012) and 27 percent in 2011, according to CBRE Group (CBG) the world’s biggest commercial realtor. New York-based Cushman sees rents gaining about 5 percent this year (2013), according to Michelle Woo, Hong Kong- based senior director of retail-transaction services”. “The drop in luxury and big-ticket purchases has impacted overall retail sales. We’re seeing a pullback in the expansion of this sector in the second half because of the slight shift in shoppers’ spending patterns”.
Lee, “who estimates current mall rents to be about A THIRD of street-level rents in the same area”. went on: “There’ll be a retail migration to the SECOND-best space” obviously because “the” BEST “space” IS TOO EXPENSIVE. “There needs to be a narrowing in the gap between the two (mall rentals & street rentals) and this will be good for the landlords”. WILL THIS HAPPEN?
“While a retail boom and government curbs on the home market have shifted individual investors’ attention toward shops in busy areas such as Causeway Bay over the past three years, those funds are now starting to move into the fringe areas, according to Centaline’s Poon”. “So many individual investors have gone into these older areas to look for what THEY THINK are bargains and that PUSHES UP the price A LOT” because of the HIGHER QUANTITY DEMANDED. Also “they think” is the latest INTERPRETATION (Web-site/URL: http://www.youtube.com/watch?v=NgnAY_eXYbI). “And, of course, after paying higher prices, they HAVE TO RAISE THE RENTS” obviously.
Finally, Chan of Benny Motors finished off: “Tai Hang used to be mostly just NEIGHBORHOOD eateries and craft shops. THERE’S NO WAY we can afford to stay here now that there are all these HIGH-END restaurants”.
High property prices was one of the things that Chief Executive LEUNG CHUN-YING promised to combat when he took office back on July 1, 2012. Of course ONLY TIME WILL TELL IF he will be successful or IF he is WILLING to do anything at all to combat this problem. So farall indications are that he HAS NOT been successful (Web-site/URL: http://www.guardian.co.uk/world/2013/jan/03/hong-kong-protests-leung-chun-ying).