A tiny Hong Kong shop has become one of the most expensive commercial properties in the world after changing hands for almost £14m — around £106,000 per square foot.
The 130sq ft store on Matheson Street, which sells audio and visual equipment, changed hands for HK$180m. Its square footage price overtakes the previous record of an East Point Road shop, also in Hong Kong’s crowded Causeway Bay district, which sold last year for HK$233m — around £18m — but for just £72,128 per square foot.
One local property agent in the southern Chinese territory claimed, however, that the buyer had seriously overpaid for the shop, which is not far from Times Square. “But it’s different from Russell Street, which is also near Times Square, but which is busy with pedestrians and passing trade. The shop is also too small, which limits the choice of tenants and limits rental growth,” he said.
The agent thought the buyer was willing to pay the record-breaking price because the minimum price of any reasonably sized retail unit on Russell Street was at least HK$300m (£23m). “The price of the Causeway Bay shop should have been less than HK$200m (£15.5m), but there aren’t too many shop owners on Russell Street or Matheson Street willing to sell, so you have to pay a premium for most shops near Times Square,” he added.
Few details about the sale have been released, but with Hong Kong’s double stamp duty the purchase will ultimately cost the new owner up to £15m. It’s thought the buyer could generate a rental yield of two per cent if the current monthly rent of HK$180,000 (£13,930) is increased to HK$300,000 (£23,200) when the lease expires this year.
Mico Chung Cho-yee [correct] is chairman of real estate investment group CSI Properties.
“Most of the prime investment properties can offer a yield of only two per cent,” he explained. “It doesn’t matter how big the shop is. The main thing is the width of the shop front, which is only nine feet.”
Whoever bought the Matheson Street shop was banking on a significant growth in rent and capital value because of its proximity to Times Square, the preferred shopping destination of mainland tourists, added Joe Lin of CBRE. “Shopper traffic may increase if the new renovated shopping arcade in nearby Lee Theatre Plaza catches on. That will boost rental growth but, despite this fantastic price, in the short term commercial and retail rents would be flat,” said Lin.
Rental values in Hong Kong’s prime reatil locations stood at £2,604 per square foot last year, beating runner up New York at (£1,983) per square foot by a large margin, according to CBRE figures. One reason is the territory’s continued attraction to retail-tourists.
Lined with luxury stores, the Causeway Bay district is near major shopping malls and attracts a large number of locals and mainland Chinese tourists. Government statistics show that visitors from mainland China accounted for 75 per cent of the city’s 2013 tourist arrivals, most on shopping expeditions.
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