Prime rents in Hong Kong's top shopping districts are down as much as 80% from their peak 8 years ago as luxury brands head to mainland China

• Retail rents in Hong Kong's three prime shopping areas have fallen to their lowest in more than 10 years.
• Pro-democracy protests in 2019 and the pandemic have hit tourism hard as Chinese tourists stay away.

Hong Kong is known for exorbitant real estate prices, but prime retail rent has fallen sharply as money from free-spending tourists from China dries up amid the pandemic.

Along Hong Kong's Russell Street in Causeway Bay district, owners of shopfronts are slashing rents by close to 80% from their peak eight years ago, Bloomberg reported, citing data from Cushman and Wakefield, a real-estate services firm. It now costs about HK$826 ($106) per square foot to rent a space on Russell Street, down from HK$4,000 ($514) in at the end of 2013.

Russell Street was one of the most expensive shopping streets in the world for shop rentals until 2019, when pro-democracy protests hit business. The COVID-19 pandemic in 2020 hit the market even more as tourism came to a virtual halt.

Luxury labels that have since moved out of Russell Street include fashion label Prada, watch brands Rolex and Omega, and high-end lingerie label La Perla. The spaces formerly occupied by these high-end brands are being filled up by shops selling items ranging from phone gadgets to affordable women's wear, reported Bloomberg.

Tents in Hong Kong's Causeway Bay fell 43% from 2019 to 2020, according to a Cushman and Wakefield report published in April. The shopping districts of Tsim Sha Tsui and Centra also saw steep declines in rental prices. Rents for the three areas are near their lowest in more than a decade, per Bloomberg, citing Cushman and Wakefield data.

Luxury brands have embraced setting up shopfronts in mainland China. From January to end-November, there was close to a 65% on-year surge in luxury shops opening in China, according to Savills, a global property agent. Many of of the major luxury brands were already present in China's top tier cities, but they have been expanding to lower tier cities to capture more shoppers, the SCMP reported earlier this year.

Hong Kong is now in discussions with China about reopening their shared border, but the pace of development in China is so fast that some are not so optimistic about the recovery of Hong Kong's retail rents.

"Hong Kong is just one of their options now," said Robert Ma, a landlord on Russell Street, per Bloomberg.