Virus scare empties malls on world's priciest shopping strip
In an almost deserted mall, the few shoppers hurry past wearing face masks. In the luxury stores, sales assistants, also in masks, outnumber customers -- if they have any at all. To pass the time, staff chat with each other or play with their phones.
This isn't a scene from some dystopian movie. Instead, it's Tuesday afternoon in Hong Kong's usually bustling Times Square, a 17-floor mega-mall in the heart of Causeway Bay, home to the world's most-expensive retail strip.
The stylish displays of Gucci and Louis Vuitton advertisements usually compete for the attention of wealthy Chinese tourists, who until early last year swarmed the city for quick shopping expeditions. Now, no more.
Already reeling from months of anti-government protests that at times broke into pitched street battles between demonstrators and police -- scaring off tourists -- the outbreak of coronavirus has dealt a second, crippling blow to retailers.
Mainland Chinese visitors, who used to come to Hong Kong to buy everything from luxury watches to discount cosmetics, plunged 53% in December from a year earlier. That's set to fall even further after the government said it will start to quarantine people arriving from across the border.
On top of that, local residents are now reluctant to go out amid fears of catching the deadly virus. The number of confirmed cases in the city climbed to 24 as of Friday, with some of those likely to have been infected locally.
"Many retailers are saying it's a disaster," said Nicholas Bradstreet, managing director of leasing at Savills. "In the last 10 days, their sales have been down 70% to 80% week-on-week. There's very little traffic into the shops" particularly in key retail districts like Central, Causeway Bay and Tsim Sha Tsui, he added.
Times Square fronts Russell Street, where at $28,713 per-square-meter a year, retail rents top salubrious addresses like New York's Upper 5th Avenue ($23,549) and the Champs Elysee ($15,473), according to Cushman & Wakefield.
The strip is usually thronged by thousands of shoppers hitting upmarket stores like Burberry, La Perla and Audemars Piguet. Not this day though. Two employees at an Omega boutique stare into space as pedestrians walk by without a glance at the watches on display.
Further down the street sits an empty Prada store. The high-end Italian fashion retailer quit its HK$9 million ($1.2 million) per month lease at the site four months early, according to the Hong Kong Economic Journal.
"Causeway Bay is very quiet now. It used to have a lot of traffic," said Wong, a salesperson at a fashion boutique in a mall near Lockhart Road who declined to give her first name because she isn't allowed to talk to the media. "With the scarcity of face masks, people would rather not go out at all."
Retail sales plunged 19% in December, the 11th straight monthly decline. The slump in consumer spending has helped drive the economy into recession for the first time in a decade.
The retail downturn is also putting the squeeze on landlords. Rents in Causeway Bay dropped 8.5% in the fourth quarter versus the previous three months, resulting in a full-year decline of 14%, according to Cushman & Wakefield.
Mall owners including Times Square's Wharf Real Estate Investment Co. will face pressure to offer rent concessions, according to Phillip Zhong, a senior equity analyst at Morningstar Investment Management Asia. Wharf's rental income will fall about 2% this year, Zhong estimates.
The property company's shares have slumped 14.6% since Jan. 20, when the virus began to spread more broadly.
Shares of other mall owners have also suffered. Link REIT, the city's biggest mall owner, is down 6.1% while Hysan Development Co., which owns retail and office space throughout Causeway Bay, has dropped 5.2%.
Singapore-based Mapletree North Asia Commercial Trust, whose Festival Walk mall was trashed during protests last year, has fallen about 5%.
The only retailers in demand at the moment are drug stores. On Lockhart Road, just a 10-minute walk from Times Square, shoppers queue to snap up face masks and hand sanitizer, which are now in short supply across the city.
Sky Fan, who runs a neighboring electronics-gadget store, can only look on in envy. The coronavirus outbreak has taken a bigger toll on spending than the protests did, he said, with sales after Lunar New Year down about 50%.
"You can see that many people outside are just hunting for masks and cleaning products," Fan said.
