Swedish retailer H&M will close its flagship store in Hong Kong owing to soaring retail rents.

The 30,000 sqft store in Central district will be vacated in the third quarter of 2013 after opening its doors in 2007. According to H&M spokesperson, Cher Chui, the company was unable to reach an agreement with the landlord on lease terms.

H&M’s location is reportedly to be replaced by Spanish retailer Zara, who will be paying US$1.4 million monthly, double H&M’s current rent.

Hong Kong, with retail rents at US$3864 per square foot per annum, tops the rankings of world’s most expensive retail rents, according to the latest research by property advisor CBRE.

In previous years, most foreign retailers chose Hong Kong as their initial entry point to the mainland China. However, when Hong Kong rents began to soar in 2009, the volume of retailers flocking into Hong Kong slowed. Many retailers are now going straight to mainland China, where rents are relatively lower.

Beijing, the capital city of China, where retail rents stood at US$655 per square foot per annum, occupied the 10th place in the top 20 most expensive retail destinations worlwide.

“Retail in Hong Kong is so fast and always expanding, so shops do close and then open up elsewhere. This is quite common in Hong Kong,” said Chui.

The closure will not affect jobs as staff will be reassigned to other 12 H&M stores in Hong Kong, says Chui. She added that H&M’s Hong Kong and mainland China stores are all performing well.

GB