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Apple not put off store plan by rising rents
25 February 2011
South China Morning Post

Hong Kong's soaring rents have not deterred Apple, the maker of the best selling iPhone and iPad, from plans to open two large stores in the city's priciest locations at an estimated cost of at least US$40 million.

The world's number-one technology company will open its first 15,000sq ft Apple Store at IFC Mall, in Central, by the end of this year, people familiar with the plan said. In the third quarter of next year Apple plans to open a 20,000 sq ft store at Hysan Place, which is under construction.

Hysan Place, the former Hennessy Centre, is owned by Hysan Development, the largest landlord in Causeway Bay.

After negotiating for more than a year, Apple signed a 10-year lease with the landlord of upmarket IFC Mall, which has achieved an average rental of HK$250 to HK$300 per sq ft per month.

IFC Mall was jointly built by Sun Hung Kai Properties, Hong Kong's largest developer by market value, and Henderson Land Development.

"Such a long lease is on non-negotiable terms by Apple as it will spend at least US$20 million in decorating its first store in Hong Kong. It needs time to recoup the investment," people familiar with the plan said.

Apple's investment in the second store would probably be higher because it was bigger, they said.

An Apple spokeswoman confirmed its first Hong Kong store would open later this year, but declined to identify the location.

"The first Apple Store in Hong Kong will be similar to those in London, Paris and Shanghai," she said, declining to comment on whether the company planned a second store in the city.

Hysan and International Finance Centre Management, which handles the management and leasing of the IFC Mall, said they did not comment on individual cases.

Livian Har, director of retail services at Knight Frank, said there was no shortage of international brands coming to Hong Kong undeterred by rising rents. "A rebound in retail sales has lured more global brands to expand in the city and driven up demand and rental," she said.

One example was Gap, the American fashion retailer, which paid HK$5 million to lease 15,000 sq ft at Luk Hoi Tong Building, on Queen's Road Central, last year.

In China, Apple's spokeswoman said the company would open its fifth store in Nanjing Road, Shanghai's busiest shopping location, this year. Apple has two stores in Beijing and two in Shanghai.

China has Apple's highest-grossing stores worldwide less than three years after the company opened its first one in Beijing.

The company said early last year that it planned to open as many as 25 stores up to the end of 2012 in the world's most populous nation - a market that Tim Cook, the chief operating officer, called a "top priority".

Apple had 323 stores worldwide at the end of the first quarter - 87 of them outside the United States.