Hysan Development Co chairman Irene Yun Lien Lee says retail locations with proven shoppers’ traffic that have a bustling and unique surrounding atmosphere have become more sought after as retailers compete in an increasingly challenging market.
That’s the core of the reason Hysan has thrived in the first half year while street-front shops have struggled and for lease signs have appeared in even the most popular shopping destinations, like Causeway Bay.
“Hysan has always strived to work closely with and provide support as well as add value to our tenants, especially when shop owners are weathering market uncertainty,” said Lee in a half year report.
“At Hysan’s portfolio in the first half of 2015, we hosted a number of high-profile customer engagement activities and experiences, including a successful dining programme in May in partnership with our food and beverage tenants and shoppers with HSBC credit cards. We also unveiled Leeisure rewards for shoppers, complemented by the inaugural Leeisure electronic and print magazines.”
The company this week reported group turnover of HK$1.714 billion, up 7.4 per cent on the same period in 2014. And at the end of June, Hysan’s retail portfolio occupancy was 98 per cent, the office portfolio full, and residential portfolio at 95 per cent.
Contrast that growth with the 2.1 per cent expansion of Hong Kong’s overall economy in the first quarter and the forecast for the year of between one and three per cent, and a drop in retail sales for the first half of 1.6 per cent.
Lee said Hysan’s strategy in recent years has been to cluster its Lee Gardens portfolio of retail and office space in Causeway Bay.
“Our iconic, well-recognised and quality Lee Gardens brand is powered by our ownership cluster. This area concentration magnifies our ability to extract synergies amongst our retail, food and beverage and office tenant mix. It also supports our active marketing and events programs to reinforce our brand, build our customer loyalty program, create a sense of community and ensure awareness as a must-visit destination,” said Lee.
“This long-term vision has helped maintain a strong tenancy demand, an improved and broadened tenancy mix, active stakeholder engagement, and most of all, a well-regarded and sustainable brand.”
To further emphasise the brand and highlight Lee Gardens’ heritage and distinct character, all buildings on the eastern half of Hysan’s property portfolio in Causeway Bay have been renamed under the Lee Gardens brand name from June 1.
“We are proud of our long history and we understand our tenants also wish to be more closely associated with this brand,” said Lee.
Hysan believes the retail market remains underpinned by “solid local support and demand”.
“Furthermore, as retailers and landlords adapt to the changes in the shopping patterns, including that of the rising prominence of eCommerce, we are confident that the retail sector will be able to weather the market volatility,” Lee said.
The group’s retail portfolio turnover grew 6.4 per cent to HK$950 million, including turnover rent of HK$50 million, (down $10 million).
“Our results reflected positive rental reversions in rental renewals, reviews and new lettings across the portfolio, with an average rental increase of around 35 per cent. They also highlighted our strategy to increase the base rent while shifting the focus away from turnover rent. Around 80 per cent of retail leases expiring in 2015 have already been committed.
The portfolio was 98 per cent occupied as at 30 June 2015, (down two percentage points from December 31st’s ‘no vacancy’ status).
Hysan Place, a hub for the younger, fashion-forward crowd, achieved around 80 per cent growth in estimated tenant sales. Hysan says this reflects its attractive retail offerings, including some popular digital products.
“We have been further refining our tenant mix and focusing on more unisex sports and leisure offerings, which match Hong Kong’s growing demand for a healthier lifestyle. Lululemon, the trend-setting yoga apparel brand, for example, is opening its largest Hong Kong store on the first floor. Another popular sector is cosmetics, and DFS T-Galleria has revamped an entire floor to showcase its beauty offerings with a brand new experiential format and expanded product categories, including popular Korean brands.”
The premium Lee Gardens hub experienced a drop in estimated tenant sales when compared to the first half of last year. The sales there were inevitably affected by the slowing down in tourist spending, but they were also partially attributable to the life cycle and distribution strategy of certain brands.
Newcomers including Roger Vivier and Dolce and Gabbana Junior helped reinforce both our adult and children’s offerings, and reflected the ongoing demand for quality space by major brands at the Lee Gardens, the company said. The hub’s food and beverage outlets, from traditional Chinese to trendy Asian and Michelin-starred French cuisines, experienced double-digit percentage growth in sales.
Lee Theatre hub, the urban fashion and lifestyle destination, achieved around 10 per cent growth in estimated tenant sales. The flagship stores at the lower levels of Lee Theatre Plaza, including Uniqlo, Muji and Aland, have proven popular with shopping families, and these shoppers also make good use of the food and beverage outlets on the upper floors of this Causeway Bay landmark.
“Our curation of the Leighton Centre ground level as a “sports-themed street” has also been successful in creating a new home for sporty apparel and footwear, such as adidas Originals, Asics and Onitsuka Tiger.”
