Landlords in premium Hong Kong retail areas are proving flexible on rents as retailers experience an unprecedented drop in sales of between 50–80 per cent during the first financial quarter this year.
Figures from real estate firm Savills show multiple mall landlords are offering temporary rent relief of 30 to 60 per cent to beleaguered tenants who have faced numerous crises over the past year, of which the coronavirus outbreak is the latest. However, some shopping-centre landlords are proving reluctant to relieve rents despite growing tenant vacancies.
Retail rents in the region fell 14 per cent quarter on quarter and by an average 43 per cent year on year.
“A hardening local situation combined with a lack of visibility is giving rise to a wide range of reactions to the current crisis from landlords and tenants,” said Savills research & consultancy senior director Simon Smith. “But on a more positive note, the lower rental costs will attract newcomers to the Hong Kong market, which for too long has charged the world’s highest occupational costs.”
“As far as we can see, vacancies are expected to rise over the next six to 12 months,” said Savills MD Nick Bradstreet, “which will put more pressure on rents over the rest of the year.”