The rental market for bar premises has seen rent reductions again. The commercial leasing market has been turbulent, and the situation is particularly dire for bar premises, which have been heavily affected by the pandemic.
A 700-square-feet ground floor shop at 6 Lan Kwai Fong in Central has been rented by a restaurant for about HK$110,000, or an average of HK$157 per sq ft, after a year in which it has been vacant.
That is about 25 percent down compared to the previous rent of HK$148,000, returning to a level similar to 15 years ago.
Industry insiders pointed out that the bar sector has been ordered to suspend operations repeatedly.
The effects of this are expected to be made clear in the short term in the form of a new wave of closures and rental price adjustments.
According to the Land Registry, the owner purchased the shop for HK$30.5 million in 2005 and held it in the name of a company called Star City. Its directors are Herman Tsoi Hak-chiu and veteran investor John Tong Chor-nam, who will be enjoying a return of about 4.3 percent.
The data also shows that the shop was leased by Comfort Drug for HK$128,000 in 2006, meaning the latest rent is lower than it was 15 years ago.
Tong also recently bought the neighboring shop. According to the Land Registry, Shop No 5 on the ground floor of Lan Kwai House at 5-6 Lan Kwai Fong was sold for HK$65 million in January.
The buyer purchased it under the name of a company called Eastern Star, for which Tong and Tsoi are also registered directors.
The 700-sq-ft premise came at an average price of HK$92,857 per sq ft. Its current tenant is Ebeneezer's Kebabs & Pizzeria, which previously paid a monthly rent of HK$142,800 but saw a reduction of 29 percent to about HK$100,000 in the latest lease.
Daniel Wong Hon-shing, chief executive and executive director of Midland IC&I, pointed out that even though the pandemic situation has improved recently, there is still no concrete schedule for the reopening of bars yet.
He said bar owners have been miserable and added that he expects a wave of business closures in the near future.
He predicted that shops in bar districts such as Knutsford Terrace in Tsim Sha Tsui and Lan Kwai Fong would be severely hit.
However, he also believes some bars will be converted into restaurants to ride out the pandemic.
Major bar districts across the city have already seen rent reductions.
Shop A on the ground floor of 37-39 Lockhart Road, Wan Chai, with an area of about 750 sq ft, was rented out to a new bar for about HK$90,000, or an average of HK$120 per sq ft.
According to the agent, the shop was previously rented by another bar for a rent that was 28 percent higher - HK$125,000.
According to Land Registry figures, the shop was purchased for HK$8 million in 1991 by a company Gold Bright Trading. The owners will earn a rental yield of 13.5 percent based on the latest rent.
A source in the bar industry pointed out that even if some landlords are willing to reduce rents, the business environment is still tough, with no end in sight for the pandemic.
Though some upstairs bars at Knutsford Terrace received a one-month rental waiver amid months of suspension, the majority of landlords are not willing to ride out the storm with their tenants, especially those on "Bar Street" Lockhart Road.