Thursday, November 04, 2010
The grand opening of The One last Friday brings the total number of new shopping centers opened in Tsim Sha Tsui in the past two years to four. This is disproportionate given the economic context, and compared with the lack of mall launches over the same period in other districts.
But then, Tsim Sha Tsui has always been a special area for retail.
“The new malls have everything to do with the signing of the Closer Economic Partnership Arrangement in 2003,” says Ricacorp research head Patrick Chow Moon-kit.
“This brought in a massive influx of mainland tourists eager to spend large sums on luxury items.
“Luxury outlets have traditionally been concentrated in Tsim Sha Tsui. With the rising sales and with no end to the shopping frenzy in sight, developers committed to projects in the area five years ago, with their projects bearing fruit now.”
Housed in a 29-story building at 100 Nathan Road, The One – developed by Chinese Estates Holdings – offers more than 400,000 square feet of retail space.
The other three shopping centers opened earlier in Tsim Sha Tsui include 1881 Heritage, by Li Ka-shing’s Cheung Kong (Holdings); iSquare, by Associated International Hotels; and K11, the brainchild of New World Development’s executive director Adrian Cheng Chi-gang.
Before the CEPA deal, Chow says shoppers had to wade through a disorganized maze of watch and jewelry shops, mainly along Canton Road.
“The major industry then was hotels. After this sector became saturated, competition made it less profitable to operate, and led to the shift in developers building retail space, which was much more lucrative,” says Chow.
With the signing of CEPA, which included clauses like the Individual Visit Scheme that made it easier for mainlanders to obtain visas to enter Hong Kong, shopper traffic in Tsim Sha Tsui mushroomed. And those visitors aren’t your regular garden variety sightseers. They’re on a mission to snap up luxury items that are cheaper here, or not available back home.
With shopping accounting for more than 80 percent of total trip expenditures for mainland tourists, they became a primary target.
“There was no way that the big developers were going to miss this opportunity,” Chow says.
The number of mainland tourists soared from a total of 12 million in 2004 to nearly 18 million last year, and now represents 62 percent of all visitors to Hong Kong. They are drawn to Tsim Sha Tsui with its unparalleled selection of luxury goods – turning the area into a bastion for well-heeled shoppers and a bonanza for retail rents.
Today, Chow says, most tours focus on Tsim Sha Tsui as one of their primary stops.
This fact alone provides the necessary business metrics for opening more retail space.
Factor in the scarce land available in the area for redevelopment, and that the shopping traffic is comprised mainly of tourists looking to purchase specific items, and you get a winning business proposition.
With the the exception of 1881 Heritage, which as a heritage site, has a government-specified layout, the other three shopping centers are constructed “Ginza-style,” according to Chow – which attests to the profitability of the facilities. Ginza is a dense, upscale shopping destination in Tokyo, with malls that are taller than they are wide to maximize retail space.
“There is still room to grow in the retail market in Tsim Sha Tsui, when you observe the throngs of shoppers pouring into the district,” Chow says.
“With these metrics, retail space in Tsim Sha Tsui will be profitable in any format.”