Hong Kong retail rents fall sharply in Q3 - consultancy

Hysan Development

15/10/2019 08:16

By Clare Jim
    HONG KONG, Oct 15 (Reuters) - Retail rents in Hong Kong,
among the most expensive in the world, fell sharply in the third
quarter, property consultancy CBRE said on Tuesday, following
anti-government protests that have pushed shop sales to a record
low.
    High street retail rents fell by 10.5% in the July-Sept
quarter compared to the previous quarter, CBRE said, the
sharpest quarterly decline since the first quarter of 1998 at
the time of the Asian financial crisis.
    Overall high street rents are likely to decline by another
5-10% over the remainder of 2019, the consultancy said.
    The Hong Kong protests began in May, in opposition to a bill
allowing extradition to mainland China, but have since evolved
into broader calls for democracy in the former British colony,
with activists throwing petrol bombs, setting street fires and
trashing metro stations.
    China has accused the West of stirring up anti-Beijing
sentiment in Hong Kong and reacted strongly to expressions of
support for the protests.
    The landlord of an 11,600 square foot (1,078 sq m),
three-storey shop space in Causeway Bay, a prime shopping
district, has slashed rent by more than 30 percent, according to
realtor Midland IC&I.
    The space will be leased for a monthly HK$480,000 ($61,196) 
to a claw crane arcade this month, down sharply from the
HK$700,000 charged from the home appliance chain Fortress before
that lease expired last October.
    The protests have taken a heavy toll on tourism and consumer
spending.
    "There's very few rental transactions; people are not making
offers, they're pessimistic about the outlook and want to
observe more," said Daniel Wong, CEO of Midland IC&I. 
    On the positive side, however, there have not been many
lease terminations yet, he added.
    A Midland survey published last month showed vacancy rates
in Hong Kong's four core shopping districts rose only slightly
to 6.5% in the third quarter, up from 5.6% a year ago.
    The realtor expected rents for core district street shops to
decline 10%-15% in the second half, and the vacancy rate to rise
to up to 8%-9% next year.
    The government said last week at least 100 restaurants have
closed in the past few months, and has repeatedly urged
landlords and property developers to offer rent subsidies to
retailers and food and beverage businesses.  urn:newsml:reuters.com:*:nL3N26W27L
    MTR Corp  0066.HK , the subway operator which is about 75%
owned by the government and itself owns some shopping centres,
said it would refund rents and other charges on a pro rata basis
to its tenants for the time it shut the stations or centres.
    MTR together with major shopping mall developers Henderson
Land  0012.HK  and Hysan Development  0014.HK  have offered some
tenants temporary rental adjustments. Henderson and Hysan have
also launched promotions to attract retail customers.
    Lawrence Wan, senior director of CBRE Hong Kong retail
advisory & transaction services, said some retailers have
negotiated with landlords to restructure their lease. That would
allow them to pay lower rent for two to three months, and then
settle the difference when the business environment stabilises.
    Some also looked for short-term leases of three to six
months and put expansion plans on hold.
    "We have got more clients asking about short-term leases.
People want to see if they could get more business in the
festive season," Wan said, citing fashion outlets hoping to
clear in-season stock during Christmas and Chinese New Year.
     ($1 = 7.8437 Hong Kong dollars)

 (Additional reporting by Felix Tam; Editing by John Ruwitch and
Raju Gopalakrishnan)
 ((clare.jim@thomsonreuters.com; +852 2912 6653; Reuters
Messaging: clare.jim.thomsonreuters.com@reuters.net))