Italian luxury fashion brand Prada will not renew the lease of its store in the Peninsula hotel in Tsim Sha Tsui, which expires on December 31.
The 3000 sqft Prada Peninsula store is expected to be carved into four separate retail spaces after Prada moves out. According to Sing Tao Daily, Prada was paying HK$2.4 million a month in rent for the space.
OC&C Strategy Consultants partner Pascal Martin was not surprised by the move.
“Luxury Hotels like the Peninsula are often the first place where luxury brands open stores when they enter a new emerging market. But as soon as the market develops and they have opportunities to open larger better stores in high-end street stand-alone or mall locations, luxury fashion brands generally prefer to focus on these newer locations. This is less true for jewellery brands that can thrive in smaller spaces. One could consider that it is an anomaly for Prada and other luxury fashion brands to still have stores at the Peninsula. One could guess that they may have wanted to close this store for a while and the end of the lease provides the opportunity,” said Martin.
The Prada Peninsula closure will leave the fashion label with nine stores in Hong Kong.
Martin says The Peninsula is now in competition with many other luxury hotels and alternative store locations in Hong Kong malls, making it a lesser magnet for high-income customer traffic.
“One could speculate that the performance of luxury brands in the Peninsula may have suffered as a result, not justifying anymore the level of rent it used to ask for.”
Divided into four tenancies, the Prada Peninsula space might achieve a higher yielding rent than as a single lease, or at least maintain it at a level comparable to what Prada was paying.
“Smaller units generally yield higher rent,” observed Martin. “But it might be challenging to attract tenants with brands as prestigious as Prada in these smaller hotel units.”
Currently, the Italian fashion house operates 10 stores in Hong Kong.
Photo credit: Hoispenard