Destination Causeway Bay
Oh, you thought CWB was pretty busy already? You ain’t seen nothing yet. The island’s shopping district is about to explode. By Shirley Zhao
There’s little dispute: Causeway Bay is mental – the relentless neon, the aggressive pushing swarms, the bargains. But, over this past week, it just got that little bit crazier, with the biggest opening the district has seen in almost 20 years.
For what seemed like an eternity, there’d been a huge hole in the very heart of Causeway Bay – a mysterious, scaffold-concealed secret that was slowly developing behind closed doors. But just a few months ago, seemingly overnight, a huge new building emerged, rising high into the Hong Kong sky.
On August 10, Hysan Place officially opened its doors. Occupying an area of 710,000sq ft – the size of almost seven Hong Kong Stadium fields – the complex includes a 17-floor shopping area of 450,000sq ft and 15 floors of office space, making it the biggest commercial project in the district since Times Square opened in 1994.
Naturally, there was plenty of hype surrounding the ultra-anticipated launch. But while the cutting of the ribbon for Hysan Place marked the unveiling of one new landmark, it also acted as a de facto green light for a period of massive change for Causeway Bay.
Walk around Lockhart Road, Jaffe Road, Percival Street and Causeway Bay’s other famous thoroughfares, and you’ll see a district partially cocooned – boarded up, readying itself for a blossoming metamorphosis (check out our detailed map for the nitty gritty) – like an ominous insinuation of the grand development to come. And, from all reports, it will be grand.
“2012 will be the year of Causeway Bay,” says Nick Bradstreet, Hong Kong-based head of leasing at Savills, the UK’s largest publicly traded property broker. “The area will undergo a burst of development that will give more market focus to Causeway Bay, in particular to the south of Hennessy Road.”
But, inevitably, with such development comes change. And, with that, there are plenty of knock-on effects – both for the better and, of course, for the worse.
OMG… the rent!
Surprise, surprise – rocketing rent is at the forefront of the changes set to rock CWB. Retail rent in the district has always hovered around the summit of global rental charts but with the new impetus and excitement sweeping into the district, it’s set to reach new heights.
Indeed, it’s already happening – and not in a small way. In the first quarter of this year, average monthly rents at CWB’s prime street retail shops saw an up-stick of 33 percent year on year to $1,600 per square foot, according to a Cushman & Wakefield study. American fashion retailer Forever 21 has taken a 51,000sq ft premise in Jardine’s Bazaar near Kai Chiu Road for its first Hong Kong store at a whopping monthly rent of $11million ($215 psf), a 175 percent increase from former tenant local fashion brand Giordano’s monthly rent of $4m. Cosmetics and beauty product chain Bonjour recently rented a 10,000sq ft space at 6 and 8 Kai Chiu Road for $5m per month (compared to the $1m a month which fashion chain G2000 paid for the retail space at 8 Kai Chiu Road). And a 24,000sq ft space at 110 Percival Street, a block away from Lee Garden Road, is currently up for rent at an asking price of $5m a month – $3.2m a month more than the previous tenant of the premises, Japanese fashion retailer JFT, was paying.
Even despite the additional space supplied by Hysan Place, it’s unlikely to ease the demand. “The completion of major commercial projects will inject more retail stock into the Causeway Bay market,” says Simon Lo, executive director of research and advisory at Colliers’ Asia branch. “But the inflow of international brands shows no sign of abating and the demand for prime retail space in the district still outstrips supply. Retail rents in the district will continue to rise in the second half of this year, albeit at a slower pace.” Furthermore, according to the Hysan Group, the district’s largest landlord, more than 98 percent of the units have been rented out at an average rent of $150 psf monthly.
“The supply of retail space in the district is very tight,” says Lo. “There are still many international retail brands wishing to come to Hong Kong and existing retailers looking for prime retail space for expansion.”
It’s an extreme situation, according to Colliers, and they expect to see increased shopper traffic in the mall’s neighbouring streets such as Kai Chiu Road, Lee Garden Road and Pak Sha Road due to a ‘positive spillover’, which, in turn, will further drive up the retail rents in the area.
Inevitably, when there’s such a supply-and-demand imbalance, there’s a flow-on effect. The big brands take the space at sky-high rent, other rents go up, and smaller retailers are forced to relocate to second or third-tier streets or move out to other cheaper districts. Says Lo: “This will lead to a bottleneck for local retail market growth.”
And it will get even busier...
All this while, you’ve probably been thinking: how can Causeway Bay even deal with more development? Every time you’ve been there, you’ve likely dealt with as much pushing as shopping. The district’s population density is already one of the highest in Hong Kong. And the traffic flow on its roads is also one of the city’s worst. Thus, the inevitable question: can CWB deal with even more people?
Vincent Ng Wing-shun, vice president of the Hong Kong Institute of Urban Design, proposes a solution: increase pedestrian zones and restrict private cars on roads in the shopping areas. “Just ask yourself one question – is the city designed for cars or for people?” he asks. “Hong Kong’s public transport system is one of the most convenient and complete in the world. You exit the Causeway Bay MTR station and every corner of the whole district is within walking distance. By restricting private cars, the air quality will also be improved and we will have more space to grow trees. More pedestrian zones will also attract more street performers and encourage all kinds of street activities, making the district more diversified and lively.
Ng also suggests the government builds more underground tunnels and even underground shopping centres to ease traffic flow on the ground, citing Japan as an example.
The suggestions may divert the crowds and improve Causeway Bay’s environment, but the modernisation of the district is likely to continue, making the neighbourhood less ‘local’ all the time. “Sometimes you feel lost on Causeway Bay’s main streets,” Ng reflects. “And you ask yourself if this place still belongs to us. But when you stroll along the backstreets and alleyways you still see mom and pop shops and small restaurants. And grannies continue ‘beating the petty person’ [a Cantonese tradition to cast people’s bad luck away] under Ngo Keng Kiu bridge.”
Ng lived in Causeway Bay in the 1960s until the fourth year of primary school. His childhood memories are always connected with the district’s Japanese department store Daimaru and its many theatres such as Jade and Pearl Theatre, Roxy Theatre, New York Theatre, President Theatre and Hoover Theatre, when the Causeway Bay Typhoon Shelter was crowded with boats and Paterson Street ran all the way to the harbour, where you could buy fresh fish directly from the boat dwellers.
After Ng moved out, more Japanese department stores opened there, including Matsuzakaya, Mitsukoshi and Sogo. Then, one after another, they turned into shopping malls, boat dwellers disappeared and theatres turned into more shopping malls and residential buildings.
According to Ng, the biggest changes to Causeway Bay have always been due to the operation of the market, rather than an overhaul in urban design. “The changes in Causeway Bay are hooked with social economy,” he says. “It’s natural, just like people growing old. Some things vanish. It’s the metabolism of a city.”
“Causeway Bay’s changes and growth are gradual and organic,” says Ng. Maybe we’re just seeing that process accelerate, now…
Hysan Place’s arrival will see a consolidation of CWB’s renowned young, hipster demographic. There are already the hidden shops in the heights of the Island Beverley, underground in Ginza and Apple Malls, and in the walk-ups along Lockhart Road. And, in Hysan Place, there’s a new destination for ‘fun-loving and trendy’ Hongkongers, with some of the brands, such as GAP, Hollister and Taiwanese bookstore Eslite, focusing on younger customers.
But the most significant change to the Causeway Bay demographic, in experts’ eyes, will come at the luxury end of the spectrum, driven on by our most obvious of sources: Mainlanders.
“Causeway Bay’s landlords are doing a lot of work to develop, modernise and shape the area to be the shopping Mecca of Hong Kong island, in order to attract more Mainland tourists,” says Marcos Chan, head of research of the Greater Pearl River Delta at Jones Lang LaSalle, the world’s second-largest commercial brokerage.
It’s hardly a surprise. Over the past few years, we’ve seen the transformation from small, local shops and the smell of dried seafood to the glittering window-fronts flaunting handbags, jewellery and watches, largely catering for the luxury end. But this trend runs a lot deeper than the simple Mainlander answer: at the more moneyed end of the spectrum. It appears the future of Causeway Bay is one as a centre for a more affluent crowd.
The cause is twofold. According to Chan, the addition of the new offices at Hysan Place and several other ongoing commercial projects will help bring in a high-income working population, providing support for the local food and drinks industry and other lifestyle retailing. “The new office supply,” he says, “will help strengthen Causeway Bay’s position as a feasible office location for the banking, finance and professional services sector.”
The comparatively high rents in Central may also see more companies turning to Wan Chai, Causeway Bay and Island East for more affordable offices. “Causeway Bay as a whole will be less affected,” says Chan, “as the vacancy rate is still very low. Even with new supply coming up, it is unlikely to lead to significant rental corrections.”
Then there’s the three new residential projects, to be completed between this year and 2014 in Causeway Bay, providing a total of 450 units. Says Chan: “This will help bring in a group of high-income individuals and families as residents and create some positive spins for retail, particularly for fine dining and other food and drinks outlets.”
Or, in short: more money, more entertainment, more shopping and more people. It’s what Causeway Bay has always been about – and that truth is only going to get more acute.