Tuesday, June 11, 2013

From High Street to High End Street


Based on a casual look at the comparison of retail tenants above, an observer would be forgiven if (s)he surmised that they related to two different streets. In fact, they are the same – ten years apart. It is Russell Street in Causeway Bay (Hong Kong), which has become known as the most expensive street for commercial leases in the world. According to international property consultants Cushman & Wakefield, monthly rents currently run US$260 – 380 per square foot. Thus, for a 1,000 square foot shop, that’s well over a quarter of a million dollars in rent per month. No wonder run-of-the-mill “high street” brands have been shooed away in favor of the luxury brands that cater mainly to the influx of Mainland Chinese tourists.
This is a trend that has been witnessed all across Hong Kong. Malls and other shopping destinations such as Leighton Road have gotten homogenized with high-end international brands. A long-standing family-oriented Italian restaurant in Queens Road East gave way to a Rolls Royce and McLaren dealer a few years ago. Interesting eateries and diverse food centers have been pushed to the fringes of good neighborhoods, or into euphemistically named “up-and-coming” locations.
While the push towards the high end has undeniably fueled economic growth in Hong Kong over the past few years, the risks and social costs have been just as palpable. First of all, too much focus and emphasis given to one target group of customers (cash-loaded Mainlanders) is a risky business proposition, particularly when such a strategy alienates large masses of other customers. A sudden shift in preferences or capabilities of the target customer group (a very real possibility, in this case) can lead to a nasty market correction and fuel widespread public resentment. Secondly, giving over prime real estate to highest-bidding foreign luxury brands deflates incentives for local small-and-medium sized businesses and creative entrepreneurialism, two segments which promote broader wealth and job creation, and often define the soul of a place.

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