CB Richard Ellis Discusses Development Potential of Shopping Centres in Kowloon Bay and Kwun Tong

PRLog (Press Release) – Aug 16, 2007 – Hong Kong - August 17, 2007 -- Since the June 2007 opening of MegaBox and EMax in Kowloon Bay, the district promptly appears to be Hong Kong's hot new shopping spot. Shoppers flocked to the malls, especially during holidays, enhancing the retail atmosphere of the whole region. However, there is some concern as to whether this success will continue in the long-run, especially as newcomers enter the region's retail market. CBRE Research's study found that the business environment of regional shopping centres in Kowloon Bay and Kwun Tong should be promising. The malls' success will depend on whether operators employ appropriate business strategies to enhance competitiveness amid a growing number of rivals.

Since the traditional industrial area of Kowloon Bay and Kwun Tong is evolving into a commercial hub, massive spending power coming from increasing numbers of office workers will greatly support regional shopping centres in the districts. In addition, prospective workers from the office space at the former Kai Tak Airport and the Kwun Tong Town Centre Redevelopment sites will further bolster retail developments in Kowloon Bay and Kwun Tong.

Besides, there are currently about 27% of the territorial population living in Kwun Tong, Tseung Kwan O, Wong Tai Sin, Hung Hom, Ho Man Tin, Kowloon Tong and Shek Kip Mei District Council Districts (i.e. the catchment areas of regional shopping centres in Kowloon Bay and Kwun Tong as demarcated by CBRE Research).

"Significant growth in the number of office workers, a huge residential population and an increasing number of tourists living within the catchment areas have created fertile ground for regional shopping centre development in Kowloon Bay and Kwun Tong. The office supply boom expected in the two districts in 2008, the completion of the Kai Tak and Kwun Tong mega projects and the proposed strategic transportation networks - Shatin to Central Link and Route 6, should further contribute to retail growth," said Joe Lin, Senior Director of Retail Services, CB Richard Ellis Hong Kong.

"On the supply side, competition among existing malls is intense, but there are no signs of oversupply. The current malls have been around for years, or even decades, with some enjoying remarkable turnover rates in recent years. This indicates that there is room for more regional shopping space in the catchment areas," added Joe Lin.

"Two new malls in Kowloon Bay opened in tandem in mid 2007, totalling as much as 2,000,000 sq. ft. of retail space, will unavoidably pose new challenges to stakeholders in the catchment areas. However, increasing spending power in the market makes oversupply of retail space unlikely for savvy developers. The new retail supply will be absorbed more quickly in 2008. By that time, the influx of office workers will become a key engine supporting retail growth. Telford Plaza's recent decision to reposition its mall to cater to office ladies rather than family shoppers is a good example," said Bess Cheng, Manager of CBRE Research Hong Kong.

Kowloon Bay's and Kwun Tong's new commercial hub, being considered as a major growth point for shopping centres, however, is not yet conveniently accessible by public transit. Proposals for improving accessibility have been put forward by the Government under its Kai Tak development plan, but improvement work is unlikely to be realised in the near future. The accessibility issue does pose a problem for the development of regional shopping centres in Kowloon Bay and Kwun Tong.

In this regard, apart from shuttle bus services now being provided, CB Richard Ellis believes shopping centre owners in the hub have to take other initiatives to help improve linkages between the malls and MTR stations to attract more shopper flows. Footbridges connecting the malls and nearby MTR stations should be considered. Shopping mall owners in the hub need to develop strategies to enhance the malls' attractiveness in a bid to counterbalance the location's inconvenience to shoppers.

In order to outperform rivals, it is important for the malls within the catchment areas to position themselves uniquely while meeting escalating expectations from customers. In developing new shopping centres, the centres' positioning and branding should be determined before the commencement of the building process to ensure that the size, layout and design of the centres fit the requirements of the malls' future trade mix.

During the leasing process, shopping centres owners may consider seeking professional advisory services from property consultants. Their broad clientele base allows landlords to have more choices in selecting tenants and have stronger bargaining power in leasing negotiations. More importantly, consultants can help owners secure the right anchor tenants, who play a key role in setting the tone for the entire trade mix of a shopping centre.

In the face of new competitors, the existing shopping centres within the catchment areas have to step up efforts to upgrade or re-position themselves, to avoid being marginalised and to capitalise on the growing demand arising from future developments. Promotional events in malls should be launched frequently, to grab customers' attention and boost the malls' business. In developing new shopping centres within the catchment areas, as new developments and transportation infrastructure greatly influence demand, landlords have to be cautious in the timing of mall openings.

Conclusion
CB Richard Ellis considers that with a growing population and mounting retail demand, the prospects of regional shopping centres in Kowloon Bay and Kwun Tong appear to be promising; more shopping malls of their type could be supported there. Accessibility of the commercial hub in Kowloon Bay and Kwun Tong has led to uncertainties about the malls' future development, but these issues can be overcome with sound planning. Competition among regional shopping centres within the catchment areas will undoubtedly increase, so existing malls should upgrade or reposition themselves in order to contend.