King Fook expands with US$34 million Admiralty lease despite slow luxury sales: analysts

King Fook Jewellery Group has leased a 550 square metre retail space at Pacific Place Phase II in Hong Kong's Admiralty district, valuing the deal at about US$34.2 million in base rent over six years. The six-year lease, starting in February 2028, carries a monthly base rent of HK$3.73 million, as per a company filing with Hong Kong Exchanges and Clearing.

Analysts see this investment as a sign of confidence in Hong Kong's retail market, despite a slowdown in luxury goods demand. Stanley Poon from Centaline Commercial noted a rising number of visitors to Hong Kong this year, supporting growth in retail sales, particularly in jewellery and watch sectors. The average rent is deemed reasonable for an upscale shopping centre with numerous luxury brands.

Financial commentator Simon Lee added that daily rent for the new store is around HK$120,000, which is still affordable for the company. However, Terence Chong from the Chinese University of Hong Kong expressed concern, stating it would be challenging for King Fook to generate enough revenue from luxury watch sales to cover the rent, given a global decline in luxury goods demand, especially in the wake of mainland China's economic slowdown.

Hong Kong saw a 1.1% year-on-year increase in total retail sales of consumer goods from January to August, while jewellery, watches, clocks, and valuable gifts saw an 11.9% increase in August compared to the same period last year. Hong Kong's visitor arrivals hit a post-pandemic monthly high of 5.46 million in August, with mainland Chinese arrivals up 6.37% from the same period last year. King Fook plans to operate the new premises as a single-brand watch boutique.