By Chia-Peck Wong Jan. 26 (Bloomberg) — Hong Kong store rents may rise by as much as 10 percent this year as retailers benefit from an influx of shoppers from mainland China, Savills Plc said. Rents in malls with the best locations, such as Times Square in Causeway Bay and IFC Mall in Central, may increase by 5 percent to 10 percent this year, while those at street level, including Canton Road in Tsim Sha Tsui , may climb 10 percent, Simon Smith , Hong Kong-based senior director of research at the property broker, said in a phone interview. “Retail rents are supported mostly by mainland tourists who come to Hong Kong,” Smith said yesterday. “The long-haul visitors who fell away last year are starting to come back.” A recovery in Hong Kong’s economy, a drop in the jobless rate and an increase in tourism boosted retail sales, helping landlords increase rents. Hong Kong’s retail sales rose 11.7 percent in November from a year earlier, the most in 16 months, government figures showed. The number of visitors from mainland China rose 13.3 percent during that month, according to Tourism Board figures. Visitors taking long-haul flights from markets such as the Americas rose 2.4 percent, the first gain in three months. IFC Mall, connected to the Four Seasons Hotel and Two International Finance Centre, Hong Kong’s second-tallest building, signed record rents in November and anticipates increases of 10 percent to 25 percent this year, said Karim Azar, assistant general manager of IFC Management. Godiva, Accessorize Godiva, the premium-chocolate unit of Turkish company Yildiz Holding AS, in November agreed to pay HK$650 ($83.60) a square foot when it moved to another location within the IFC Mall, a record for the property, Azar said. The monthly rent for the 760 square-foot (70.6 square meters) shop is HK$494,000. After Godiva signed its lease, Accessorize, a chain selling scarves and accessories owned by closely held U.K. fashion retailer Monsoon Plc , agreed to rent a 500 square-foot shop in IFC Mall for HK$310,000, or HK$620 a square foot, Azar said. “On top of the economic conditions, we have also improved our trade mix” that draws 200,000 visitors a day, Azar said in an interview yesterday. Monthly rents at the mall last year rose 25 percent to between HK$250 and HK$620 a square foot, Azar said. Some jewelers and luxury watchmakers paid IFC Management rents of more than HK$1,500 a square foot last month, bolstered by Christmas sales, he said. These retailers paid rents based on turnover once sales exceeded a certain amount. The IFC project, including the mall and two office towers, are jointly owned by Sun Hung Kai Properties Ltd. and Henderson Land Development Co. Pricing Power Owners of shopping malls will “definitely have the power to raise rents” this year, said Benedict Ma, an analyst at CB Richard Ellis Group Inc. Still, street-level shops in prime locations, such as those opposite Times Square, can command higher rents, Ma said. Hong Kong’s record for retail rents is a 95 square-foot, street-level shop in Causeway Bay, currently tenanted at HK$1,800 a square foot a month, Smith said. Rents for such shops, which rose 2.6 percent last year, may advance 8 percent in 2010, Ma said. China’s economy expanded a more-than-forecast 10.7 percent in the fourth quarter from a year earlier, the fastest pace in two years, adding to the case for policy makers to pare back stimulus measures. “The hot money is coming down from China; a lot more depends on its ability to gently withdraw its stimulus without imperiling the broader growth,” Smith said. Hong Kong stocks fell for a fourth day yesterday. The benchmark Hang Seng Index has dropped more than 10 percent from its high in November. To contact the reporter on this story: Chia-Peck Wong in Hong Kong at cpwong@bloomberg.net .
