Protests sparkrent-cut clamor

Property | Kevin Xu 12 Sep 2019

Street shop tenants are asking landlords to slash rents, as the ongoing anti-government demonstrations have resulted in turnover in the retail sector in the core business district plunging 40 to 50 percent.

Veteran property investor Lai Wing-to said some of his tenants are demanding rent reductions of 20 to 30 percent.

Billionaire Ma Ah Muk, dubbed Hong Kong's "King of the Minibus," recently chopped HK$100,000 off the HK$600,000 monthly rent for a shop space he owns on Russell Street in Causeway Bay, after the pharmacy tenant saw its business declining sharply over the past two months.

The rent of the business premises used to be as high as HK$1.2 million four years ago.

Meanwhile, a tenant terminated a rental contract for a shop measuring more than 20,000 square feet in the Hay Wah Building on Hennessy Road in Wan Chai, nearly a year before the expiry of the lease, forfeiting three months' deposit of HK$1.95 million.

The tenant cited slumping business amid political uncertainties for the early termination.

Separately, Angel Cosmetics International founder Angel Cheung said her branches in Mong Kok suffered most from the continuous protests and suspended business four times.

The company's cosmetics business slumped about 20 percent, while its beauty service plunged some 50 percent, she said.

Cheung said she had called landlords to cut rents for two of the premises that her branches occupy, but one of them flat out refused.

She said she plans to write to landlords of all branch business premises to seek rent reductions.

But veteran investor Lai, who has been an active player in Hong Kong's retail property market, said tenants should wait another two months before asking landlords for rent reductions. Street-shop rents rallied in the first half of the year after hitting bottom, and it was unexpected for the local retail lease market to take such a heavy hit since the protests started in June, he said.

Lai added the recent social unrest has impacted street shops far more than the SARS epidemic did in 2003.

Pierre Wong Tsz-wa, managing director of Midland Holdings (1200), expects overall street-level shop rents to fall 20 to 50 percent in the following several months.

He said the impact of the anti-government protests was inestimable, as the demonstrations are widespread, and it remains unknown when they will end.

Dennis Cheng, senior sales director at agency Ricacorp (CIR) Properties, said the social movement holds broad influence on the retail lease market, including street markets in Yuen Long and Sheung Shui in the New Territories.

He forecasts street-level shop rents on Castle Peak Road in Yuen Long to fall by a further 20 to 30 percent.

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