Skyrocketing Rents Pushes HK Ahead of NY to Become the World’s Most Expensive City

Hong Kong ended New York’s 11-year reign as the home of the world’s most expensive district for retailers as luxury-brand companies competed for space to sell goods to mainland Chinese tourists.

Average annual rents at Causeway Bay on Hong Kong Island rose 35% to US$2,630 a square foot at the end of June from a year ago, Cushman & Wakefield Inc. estimates. Hong Kong overtook Fifth Avenue in Manhattan, while Paris’s Avenue des Champs-Elysees rose to third in a global ranking of 326 prime shopping locations published by the real estate broker today.

Causeway Bay landlords Wharf (Holdings) Ltd., Hysan Development Co. and Emperor International Holdings Ltd. (163) reported rising sales for their tenants as visitors from mainland China took advantage of tax-free shopping in Hong Kong. Tourist spending rose 18% to HK$138 billion ($17.8 billion) in the first nine months, the territory’s tourism board estimates, bolstered by a 31 percent increase in visitors from the mainland.

International fashion brands and luxury retailers have used flagship stores in Hong Kong to break into the Chinese mainland market by implanting a good impression of their brands on visiting mainland tourists, analysts said.

Big landlords in Causeway Bay such as Wharf (Holdings) Ltd, Hysan Development Co and Emperor International Holdings Ltd reported rising sales for their tenants as visitors from the mainland took advantage of tax-free shopping in Hong Kong.

During the first eight months of this year, a total of 31.6 million mainland tourists visited the city, outstripping the 28.1 million registered last year, which now also accounted for over 70 percent of the total visitors to the city, latest government data show.

Sa Sa International Holdings Ltd. (178), a Hong Kong-based cosmetics chain, in September leased a 1,000 square-foot (93 square-meter) street-level store on Lockhart Road for HK$850,000 a month, according to Midland Holdings Ltd., which handled the deal. That was more than double the amount paid by the previous tenant, the broker said.

Paris rose two places following a 30% increase in prime rents to $1,129 a foot as international retailers including Levi Strauss, Hugo Boss and Kusmi Tea opened or refurbished stores. Tiffany & Co. plans to open a 974 square- meter shop in the city in 2014.