Fashion retailer H&M is shutting its flagship store in central Hong Kong (pictured right) due to sky-high rents in the southern Chinese city, a report said Friday.

Five years after launching its first Chinese store in Hong Kong's Central district, the Swedish fashion house is closing the 30,000 square-foot (2,790 square-metre) space, the Wall Street Journal reported.

H&M spokeswoman Cher Chui said the new tenant, clothing retailer Zara, had agreed to pay rent of $1.4 million a month, twice what H&M was paying.

"Retail in Hong Kong is so fast and always expanding, so shops do close and then open up elsewhere. This is quite common in Hong Kong," Chui was quoted as saying.

Tourism is a major source of retail revenue in Hong Kong, driven by spending from mainland Chinese visitors.

Limited new supply and strong retail sales in 2010 and 2011 saw retail rental growth of about 20 percent last year, exceeding the 2008 peak, according to Fitch ratings agency.

It said China's economic slowdown could see rents moderate in 2012, while remaining in "positive territory".

The prestigious shopping hub of Central is prized as a retail space as much for its branding opportunities as for its sales, but soaring rents have seen a trend toward "decentralisation" to other areas.

Chui said H&M had 12 shops in Hong Kong.

"Sales in Hong Kong and China are doing very well," she said.