Room to spare in shopping areas

Property | Staff reporter 3 Sep 2020

Hong kong's top shopping districts are on the verge of a vacancy crisis amid the ongoing Covid-19 pandemic, with the percentage of shops sitting empty in five core areas remaining in the double digits, according to data from Centaline Commercial for July.

Of the five districts - Causeway Bay, Tsim Sha Tsui, Central, Wan Chai and Mong Kok - Central saw the highest vacancy rate at 20.39 percent, more than double the 8.05 percent rate reported in January.

In Causeway Bay, the vacancy rate more than tripled to 11.53 percent from 3.5 percent.

Elsewhere, 16.47 percent of shops in Tsim Sha Tsui, 14.64 percent of shops in Wan Chai and 12.24 percent of shops in Mong Kok were empty.

There are about 160 vacant shops on the main streets in Causeway Bay, Tsim Sha Tsui, Central, and Mong Kok as of mid-August, according to Sing Tao Daily, The Standard's sister newspaper.

The pandemic has also brought Hong Kong's tourism sector to a near standstill.

Arrivals dropped sharply in July to 20,600, representing a 99.6 percent plunge from the year before, according to the Hong Kong Tourism Board.

In the first seven months of the year, arrivals added up to 3.53 million, down by 91.2 percent.

All of this means retail shop owners are feeling the pinch, with rents in Causeway Bay down by more than a third in the first six months of this year, data from Cushman & Wakefield revealed.

Hang Seng Bank (0011) slashed rents for three street-level shop premises at Hang Seng Tsimshatsui Building, media reported.

Of these, a 1,072 square foot shop was leased for around HK$200,000, or HK$186 per sq ft, after HK$190,000, or 48.7 percent, was cut from the original asking rent.

Last month, British fashion retailer Topshop said in a Facebook post that it plans to close its branches in Hong Kong, joining the exodus of major fashion brands from the city amid a retail sales slump.

Meanwhile, data from the Land Registry and Midland shows that the number of registered nonresidential property transactions was down 37 percent in the first seven months.

Against this background, the Hong Kong Monetary Authority last month relaxed the loan-to-value ratio caps for mortgage loans on nonresidential properties by 10 percentage points from 40 percent to 50 percent.

"With business confidence continuing to be affected by the Covid-19 pandemic and rising geopolitical tensions, nonresidential property markets are likely to remain under pressure," the city's de facto central bank said in a statement.

The relaxed mortgage rules will give commercial property buyers more financial flexibility, with shop premises worth HK$20 million or below to benefit the most, said Raiky Wong Wai-kei, the director of Centaline Commercial's retail department.

Wong predicts that the decision will see more residential property investors taking an interest in buying shops.

But economist Andy Kwan Cheuk-chiu, the director of ACE Centre for Business and Economic Research, doubts that this will stimulate the market, as demand for office and retail space has decreased because of Sino-US tensions and more people working from home and shopping online.

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