You do not judge a book by its cover. At least you flip to the end of it.
Likewise, you cannot make pronouncements on Tsim Sha Tsui’s prosperity without making trips to the basements of its many shopping malls.
Over the weekend, I was in Tsim Sha Tsui for a seminar and dim sum. Walking along Nathan Road, I was surprised to see quite a few mainlanders hauling large suitcases just like in the past.
Perhaps it’s a sign that the mainlanders are feeling more confident now about their economy and currency, and also putting behind the ill-feelings generated by the localist protests here in the past.
Anyway, that’s another story. What I really want to dwell upon here is the contrasting picture between the scene above the ground and that at the basement shops in the area.
While it was hot and crowded on Nathan Road, some shops in the basements appeared to be like cold storage facilities, with not much activity going on.
That seemed to be consistent with the observation of a Hong Kong Economic Journal writer “Mary” recently that she was shocked to find that a trendy shopping complex between Cameron Road and Chatham Road has become something of a dead mall – with very few tenants.
Is this Tsim Sha Tsui, one may wonder.
The sad truth is that the retail sector there was not murdered by the tourists, but by the landlords.
Apparently the landlord of that mall converted the retail space into sub-divided units and offloaded them to local private investors.
The mini-units were less than 100 square feet in size, with the smallest shop measuring only 30 square feet, or about the size of a queen bed.
After cashing out some 600 units from selling sub-divided commercial shops, the landlord is not obliged to maintain the facility as a five-star trendy mall, although it is still charging a hefty management fee.
Good luck to those small shop owners who were lured into investing in the units due to the promise of a rental guarantee for two years.
This reminds us of the famous Jordan Plaza, which drew many TV artists into making mini-shop investments back in 1992.
The first few years were alright until the management company walked out and left the property idle for 10 years.
It was not until 2010 that the mall attracted a general offer to buy out all shop owners at HK$138,000 per unit, or about 93 percent off from their initial investment of HK$2 million.
If there is something to learn from the above stories, it is this: the property market in Hong Kong may not work as you envision.
The first rule in property investment boils down to one word: location. To emphasize its importance, it is often repeated three times – location, location, location.
However, in our city it is also important to literally get to the “bottom” of the facility.
It is said that “one commercial shop raises three generations”.
There is no shortage of stories saying that one could have reaped a 10-fold gain if the person had invested during tough times like the SARS crisis or the global financial turmoil.
Well, not if you had bought just a tiny unit in a basement.
Remember, local developers know too well that they can maximize profits by sub-dividing their units and selling them at sky-high prices.
But all those profits may come at the cost of the people who actually purchase the units, as many are discovering now.
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