Mall rents tipped to drop by up to 25pc

Business | 31 Mar 2016

UBS has issued a pessimistic outlook for the local property market, warning rents in shopping malls could drop by up to 25 percent.

The investment house said rents in luxury malls will drop by 20 to 25 percent by the end of 2017, while other malls are also likely to see rents fall by 15 percent.

This comes after many malls issued rent hikes last year when renewing leases with tenants.

But UBS said it believed the drop would come from the heightened supply of retail space in the next three years.

"Supply is to triple compared to the historical average," said UBS head of Hong Kong and China real estate research Eva Lee Chi-wing.

Some of the largest retail supply comes from the New World Centre redevelopment in Tsim Sha Tsui, YOHO mall extension in Yuen Long and community malls in Tseung Kwan O.

"The down cycle this time is expected to last for two years," Lee said. She predicted the unemployment rate will reach 4.5 percent by the end of the year and home prices are also set to drop by a further 20-25 percent. The recent lackluster sales in the primary home market was also concerning, Lee said.

ESTHER YU



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