Summary of Key Points
This news article discusses the dynamics of rental prices and market changes in Hong Kong's retail industry: The closure of the Mixue Ice City store in Tsim Sha Tsui, due to a monthly rent of HK$250,000 (which requires selling 30,000 cups of lemon water at HK$9 each to cover the cost), has sparked discussions about the high rental rates in the city. On one hand, many affordable older stores are closing due to increased rents and changes in consumer habits. On the other hand, the rent in central areas has dropped by 50% since the pandemic, attracting new brands from mainland China (such as Ba Wang Cha Ji and Xi Cha) and internationally (such as Korean restaurants), leading to a decrease in vacancy rates and a slight increase in rents. The market is undergoing a process of "rebalancing."
1. Mixue Ice City's Closure: High Rent as a Major Factor
The closure of Mixue Ice City in Hong Kong is not an isolated incident; the primary pressure comes from high rental costs:
- Financial Strains: The Tsim Sha Tsui store has a monthly rent of HK$250,000, and it would need to sell 30,000 lemon water cups at HK$9 each to cover the rent, not to mention other expenses like labor and utilities. Even with prices twice as high as in mainland China, Mixue Ice City's affordable pricing model makes it difficult to profit from selling drinks.
- Additional Challenges: The brand has faced issues with food hygiene, and the convenience of Hong Kongers shopping in mainland cities (with some young people saying, "It's cheaper to buy drinks in Shenzhen") has affected customer traffic and reputation.
- Brand Strategy: It is speculated that Mixue Ice City may have chosen to rent a prime location in Hong Kong not for profit but to leverage the city's international influence, as Tsim Sha Tsui and Mong Kok are popular areas with high footfall.
2. Wave of Old Store Closures: Rent is Just One Factor
In recent years, over 300 old stores have closed in Hong Kong, with high rents being a primary reason, but there are other underlying issues:
- Rent Pressure: For example, the "Qiu Ge Stew Soup" restaurant in Sheung Wan had to close after its owner increased the rent by 20%, and a 48-year-old Western restaurant in Fanling had to shut down due to significant rent increases. Owners in central areas refuse to reduce rents, making it unsustainable for small businesses.
- Changing Consumer Habits: Hong Kongers prefer to shop in mainland cities where prices are lower, and the number of tourists has fallen short of expectations, leading to weaker evening sales and insufficient revenue to cover costs.
- Lack of Succession: Young people are reluctant to take over old stores, and owners prefer to retire rather than bear high rents. Shops in residential areas are frequently replaced, but the quality of these new establishments often declines.
- Consumer Expectations: Hong Kongers have high standards for product quality; if a new store fails to meet their expectations, they stop returning, resulting in short-lived popularity.
3. Central Area Rent Rates: From the Highest in the World to a 50% Reduction
Rental rates in Hong Kong's central areas used to be among the highest globally, but they have now dropped:
- Historical Highs: In 2018, the annual rent for one square foot on Russell Street in Causeway Bay was $2,671, more expensive than Fifth Avenue in New York.
- Reasons for the Drop: The pandemic and travel restrictions led to a sharp decrease in tourism, reducing demand and causing vacancy rates to rise. For instance, the rent for Mixue Ice City's Tsim Sha Tsui location dropped from HK$500,000 per month in 2018 to around HK$250,000.
- Beneficiaries of the Reduction: Lower rents have opened up opportunities for brands from mainland China (such as tea and restaurant chains) that could not previously afford to operate in central areas due to high rent costs.
4. New Brands Entering Hong Kong: Lower Rent Rates Make the Market Attractive
More and more brands are entering Hong Kong, driven by practical considerations:
- Mainland Brands: Ba Wang Cha Ji, Xi Cha, and Tai Er Suan Cai Yu have opened stores in Tsim Sha Tsui and Causeway Bay. Mainland electric vehicle brands (like BYD) are setting up outlets in Wan Chai, and medical beauty chains and mid-to-high-end clothing brands are also seeking locations in central areas.
- International Brands: Korean restaurants are frequently visiting Hong Kong to assess market potential; despite higher rent costs compared to South Korea, the higher sales volumes make it profitable.
- Market Appeal: Hong Kong's status as an international consumption hub, combined with high local incomes and a growing tourist population (especially after the tourism recovery), makes the market attractive for brands looking to expand.
5. Market Rebalancing: Falling Vacancy Rates and Slight Rent Increases
The retail market in Hong Kong is beginning to adjust:
- Vacancy Rates: The vacancy rate in the four main central areas dropped to 5.8% in the fourth quarter of 2025, the lowest since 2019.
- Rent Increases: Although rents have been increasing for fifteen consecutive quarters, they rose by 0.9% in the first quarter of 2026, indicating a market recovery.
- Healthy Balance: Both landlords and brands are adjusting their strategies: landlords are no longer insisting on high rents, and brands are choosing locations that suit their needs. New businesses are filling vacancies, revitalizing the central areas.
In summary, Hong Kong's retail market has gone through a cycle where high rents drove out older stores, followed by a drop in rents that attracted new brands, leading to a gradual balance between supply and demand. This is a normal part of market self-adjustment. The analysis explains these complex economic trends in simple language, making it accessible to non-financial professionals who want to understand the changes in the local retail landscape.