K11 Group, the luxury property unit of billionaire Henry Cheng’s New World Development, is banking on a recovery in Hong Kong’s luxury retail sector to cushion the property market downturn, with luxury brands expanding their presence at K11 Group’s flagship shopping malls in the city.
The expansion of K11 Musea in Hong Kong’s main shopping district of Tsim Sha Tsui will include upgraded stores by brands such as LVMH’s Loewe and Kering SA’s Saint Laurent and Balenciaga, as well as a new store by Prada SpA, the group said in a statement to Bloomberg News.
Other brands planning store renovations include Italian fashion house Brunello Cucinelli S.A., Richemont’s Van Cleef & Arpels SA and Swiss watchmaker Audemars Piguet Holding SA. The renovations will double the combined retail space of the mall’s seven luxury brands to more than 30,000 square feet, according to K11.
The statement confirms an earlier Bloomberg report about Prada’s new store at K11 Musea.
Developer New World, struggling with higher debt levels than its peers, warned last month that it expected to lose up to HK$20 billion ($2.6 billion) in the financial year to June, but the luxury pivot at K11 mall was one of the first clues to its turnaround plan.
Much of the decline reflects a drop in property values as Hong Kong suffers its worst ever property market crash due to high interest rates and a broader economic slowdown.
Hong Kong’s big property owners are pinning their hopes on luxury brands and their ability to appeal to wealthy customers who are least vulnerable to the economic downturn. Global brands that scaled back operations in Hong Kong during the coronavirus quarantine are also reassessing the city, attracted by rents in the central shopping district that have fallen by up to 90% from pre-pandemic levels.
“We are thrilled to see so many leading luxury brands set up shop at K11 Musea, especially in the current retail climate in Hong Kong,” K11 Group executive vice president Richard Cheung said in a statement.
K11-branded shopping malls have been key growth drivers for New World’s investment property division. In the six months to December, Musea recorded a 41 percent increase in sales compared to a year earlier, driven mainly by luxury spending, beauty care and cultural activities, according to New World’s financial report.
The brand, founded by Adrian Cheng, CEO of New World and Henry’s eldest son, has strongly integrated arts and culture into its facilities: Musée is home to a large number of artworks and has hosted several high-profile events in recent months, including Louis Vuitton’s first-ever fashion show in Hong Kong last year and an exhibition of popular Japanese manga character Doraemon this summer.
New World reported in its July newsletter that the month-long exhibition had led to a 40 percent increase in average tourist spending at the museum and a 30 percent increase in attendance during its opening weekend.
Shirley Chao
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