The Hong Kong retail rent slump will last at least a year, predicts a 30 year veteran in the industry.
In a question and answer interview published in the South China Morning Post, Sheraton Valuers MD Michael Chik Pa-fai says he has witnessed a number of up and down cycles and the latest one is nothing new.
“It will take a year to let the market finds its bottom,” he said, with rents set to return to the level of 2011.
“Rents have jumped too fast over the years.”
Chik Pa-fai said he does not expect to see street shop rentals stop falling in Causeway Bay and Central in the short term.
“The falling trend began when luxury brand Coach terminated the leasing contract of its Central shop due to slow sales of luxury goods. Adidas will now move into the three-storey shop for lower rent. The fall led to a domino effect and extended the pressure to Causeway Bay in the third quarter, and it will spread to Tsim Sha Tsui soon.
“There are still a number of shops vacant in Causeway Bay, such as those in the second-tier street Percival St.”
But he said the pace of rent correction in Causeway Bay is slowing after the recent decline. “Rents will start to fall on Canton Rd when a number of leases expire at the end of this year and next year.
“When there is vacant shop, landlords of shops on the street will feel the pressure. New leases for some shops on Canton Road will be 30 per cent below old leases.”
The full, extensive interview can be read online here.