No vacancy at Hysan retail properties

Hysan Development Company has delivered a lesson in retail property management, overcoming the luxury retail downturn to end the year fully tenanted and with increased profits.

The parent of the Hysan retail properties – including Hysan Place and Lee Gardens – has reported total turnover of HK$3.430 billion (US$ 441.6 million), up 6.4 per cent from HK$3.224 billion in 2014. Recurring underlying profit, its key core leasing-business performance indicator, and underlying profit were both $2.283 billion (both up 5.5 per cent from HK$2.163 million in 2014). Those figures include the company’s office and residential property interests.

The company’s retail KPIs were no less impressive: Retail revenue rose 5.6 per cent (lower than the 7.3 per cent of 2014), foot traffic rose 5 per cent and overall estimated tenant sales rose 10 per cent – Hysan Place achieved around 20 per cent.

All this during a time overall retail sales in Hong Kong fell 3.7 per cent and luxury retail sales fell by as much as 20 per cent in some categories. Rental renewals, reviews and new lettings achieved an average increase of around 25 per cent, with part of that attributable to switching to a higher base rent in line with expectations of slowing retail sales.

Foot traffic for the Lee Theatre hub improved by around 10 per cent as consumers gravitated toward trendy and good-quality low-to-mid-price items, such as those from Aland, Cotton On, Muji and Uniqlo, as well as improved F&B offerings.

It is what chairman Irene Yun Lien Lee accurately described as “a solid retail performance”.

”We anticipated a challenging 2015, but the year turned out to be far more volatile and difficult than expected. Crashing oil prices and a noticeably slowing Chinese economy together with alarming worldwide geopolitical issues were only some of the dark clouds that gathered.

“In a local context, the decline in retail sales, especially in the luxury sector, gathered pace. Although largely expected in a climate of adjustment, structural changes affected spending patterns and shopper mix.”

Lee says Hysan had slower sales in the luxury sector, but the company had foreseen this.

“Since we anticipated that the market would normalise after strong growth during the past decade, we committed to a strategy of diversification by pivoting our portfolio toward the mid-to-affordable market and we leveraged on our leading position in children’s offerings and in sport and lifestyle products,” she explains.

“Hysan continues to build on and fine-tune the clear positioning of our three hubs. Each hub represents about one-third of our portfolio in size. Our well-balanced and diversified portfolio forms the platform for our retail strategy and will position Hysan well to meet the challenges ahead.”

Lee says the company strives to meet stakeholder expectations through creativity, resourcefulness, professionalism, strong teamwork and swift action.

“Our strategy to exceed expectations began with the enhancement of diversity in our retail tenant mix. In recent years, we have built a retail portfolio anchored by more than 20 flagship stores covering a range of products and price points. By adding a significant number of health and leisure brands and their products targeting different segments of customers, both Hysan Place and the Lee Theatre hub have developed a more ‘sporty’ look and feel that appeals to both both the young and young-at-heart who focus on health and work-life balance.”

Lee says F&B is now an increasingly vital and integral part of retailing.

“Hysan ensures a flow of new concepts that appeal to consumers’ increasing sophistication and demands for all things original and exciting. Our F&B offering covers a range of price points, attracting casual, chic, professional and business diners as well as family gatherings. There are seven Michelin-starred or -recommended F&B outlets in the Hysan portfolio. Our reputation as a ‘foodie haven’ enhances our profile as a leisure venue that goes beyond shopping.”

To maintain retail sales growth in its centres, Hysan retail continued to devote significant resources to promotional activities and programs to increase foot traffic.

“We differentiated from other shopping malls, which also significantly stepped up their promotional activities, by working closely with our tenants to create targeted promotions to support their marketing strategies.

“Finally, we have further enhanced our customer service on all fronts. We clearly understand that a commercial property owner’s attention should not end with its tenants, but also focus on those who frequent its shops. As part of our drive to create positive customer experiences, our initiatives have included continuous refinement of the Club Avenue VIP service, new events for our Kids’ Zone programs, and a new and enhanced training setup for our front-line property-management personnel.”

The tenant mix was refined throughout the year with 32 new tenants coming on board, many providing themed unisex sports and leisure offerings, like Columbia, Nike and The North Face. These offerings were complemented by activities and events with a healthier lifestyle theme. Lululemon Athletica, for example, opened its largest Hong Kong store and provided regular yoga activities in Hysan Place’s Sky Garden.

Major placemaking events like Iron Man 3 drew the attention of traditional and social media, translating into exceptional mall traffic, says Lee.

Other significant changes and additions included DFS T-Galleria’s new lower-priced beauty hall concept at the basement floor, as well as Line’s first Hong Kong outlet. Kyo Hayashiya, a 262-year-old Japanese tea shop, also opened its first outlet outside of Japan in Hysan Place.

These improvements protected Hysan retail from an expected drop in tenant sales at Lee Gardens, with its more luxury-orientated tenant list.

“These figures were impacted by the slowdown in tourist spending and depressed consumer sentiment because of local stock-market volatility, as well as the life cycle and distribution strategies of certain brands,” says Lee. “This hub’s food and beverage offerings, including three Michelin Guide-starred or -recommended restaurants, continued to be very popular and saw a strong double-digit percentage growth in tenant sales.”

Lee Theatre hub had a healthy growth of around 5 per cent in estimated tenant sales. Both the Lee Theatre Plaza lower-floor anchor stores and the upper-floor F&B outlets performed well. Putien, Sorabol and Wu Kong are among Lee Theatre Plaza’s top restaurants and are recommended by theMichelin Guide.

The sports and lifestyle stores in Leighton Centre also saw good tenant sales growth. Adidas Originals, Asics and Onitsuka Tiger were among last year’s additions, while Fila and Haglöfs joined the ground-floor street front at the turn of the year.

“We strive to strengthen the links among the group, our tenants and their customers. We partnered with a premium brand on an online-to-offline project last year whereby a number of worldwide exclusive items were to be reserved online in the Club Avenue app and picked up in store in Lee Gardens,” says Lee.

“The results were very encouraging, and several more brands decided to participate in similar programs.”

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