Hongkong Land Holdings Ltd and retail tenants, including Hermes and LVMH’s Louis Vuitton, will invest US$1 billion to revamp the developer’s high-end mall in Hong Kong, in a vote of confidence in the city’s luxury retail industry.

The plan to upgrade Landmark, Hongkong Land’s flagship retail space in Central, will create multi-story maison-style stores for 10 tenants, who will see their total shop space double, according to the landlord. It will include new restaurants. 

The revamp, one of the largest in Landmark’s 44-year history, comes at a tough time for Hong Kong’s retail sector. Once dubbed a shopping paradise especially among Chinese tourists, the city is facing increasing competition from destinations like tax-free island Hainan and casino hub Macau.

Cartier, Chanel, Dior, Hermes, Louis Vuitton, Prada, Saint Laurent, Sotheby’s, Tiffany & Co and Van Cleef & Arpels are expected to spend US$600 million collectively on the fit-out of the new stores. For Hongkong Land, the project will cost US$400 million. The tenants have on average 10-year lease commitments to Landmark. 

The bigger store space - more than 220,000 square feet (20,439 square metres) - will allow brands to provide wider assortments of products and more private areas catering to top customers. To make room, Hongkong Land will convert the lowest two floors of a pair of office buildings. The affected office tenants will be relocated within the landlord’s portfolio in Central. 

“We certainly remain very confident about the long-term prospects of Hong Kong, given the concentration of wealth and the development” of the city, Alvin Kong, an executive director at Hongkong Land, said in an interview. 

The landlord began conversations with tenants about upgrading the retail space about two years ago. “When we talked to them about future plans, we sensed that there is a general interest about investing in Hong Kong and Central, to elevate their presence further” in the business district, Kong said.

The investment plans come during a slump in retail sales in the city, with the value of transactions falling 14.7% in April from a year earlier, the most since July 2020, according to government data. Sales of clothing and footwear declined 24%, while those of jewellery and watches dropped almost 29%. 

Landmark is more resilient to changes in tourism patterns because 80% of its customers are local residents, according to Alexander Li, chief retail officer at Hongkong Land. The mall’s top 70 shoppers spent a combined HK$1 billion (US$128 million) last year and HK$500 million so far this year, Li said. “You can see [that] this momentum is still strong among the top spenders.” 

The project will span three years, with work starting this quarter. The mall will remain open throughout the project but there will be a “moderate temporary reduction in retail income,” according to Li.

Hongkong Land is one of the biggest commercial landlords in Central. Its offices house the likes of JPMorgan Chase & Co, while its retail space lists the world’s biggest brands as tenants. The company’s revenue fell 18% in 2023.

  - Bloomberg