Wharf cuts Harbour City retail rents by up to 40pc
Wharf (Holdings) has cut rents on some retail units in its massive Harbour City complex at Tsim Sha Tsui by as much as 40 per cent.
A spokesman for the group's subsidiary, Wharf Properties, said it decided to cut rents for tenants renewing leases to reflect the downturn in the retail and property markets.
'It is not a policy, but if the market falls then the rents will fall,' he said. 'We are renewing at market rates.' He refused to discuss individual leases and said it was impossible to generalise about the size of rent cuts.
'It depends upon many factors, such as the type of business and the location within Harbour City,' the spokesman said.
In one instance, a tenant with a 400 square foot shop said he had his rent cut by just over 40 per cent to about $75 per sq ft on the gross.
Wharf leases more than 1.5 million sq ft of retail space in Harbour City, which includes Ocean Centre, Ocean Terminal, Ocean Galleries, Hongkong Hotel, Marco Polo Hotel, Prince Hotel and Gateway I.
It said about 25 per cent of the retail leases were up for renewal this year and could be affected by the rent reductions.
Property analysts said they were not surprised to hear that Wharf had cut rents, though earlier, the group had rejected requests for rent cuts from tenants whose leases were not yet up for renewal.
Analysts said they had heard that other landlords also had cut rents by 30-40 per cent.
According to some retailers, some landlords in decentralised areas have reduced rents even more.
Peter Newman, managing director of Design 2000 in Harbour City said: 'I believe that large rental reductions are being obtained by retail and commercial operations, more so than in busy well-located areas like Central, Tsim Sha Tsui, and Causeway Bay.' However, some tenants said they were not happy despite the rent reductions because business was so poor in Tsim Sha Tsui.
'A 40 per cent cut in rent doesn't mean a thing if there is no business coming in,' said Leon Lam Yat-fu, owner of Lace Lane which is located in the Hongkong Hotel shopping arcade.
'It helps, but some of these people still can't make any money,' he said.
One tenant said his average turnover had dropped from $100,000 per month last year to less than $20,000 per month this year.
Others said their situation was so precarious they had opted to sign one-year leases instead of the standard two-year or three-year retail lease offered by the landlord.
'Wharf wanted more than one year,' a tenant said. 'But I couldn't see it. If the market is going to go up, then I prefer to pay more in a year's time.
'But the market is still going down. Why should I sign for three years when I could be paying less next year? 'I can struggle for one more year.' Tenants said the vacancy rates in the hotel shopping arcades were as high as 50 per cent, while 30 per cent of the space in malls such as Ocean Terminal and Ocean Centre were vacant.
Wharf denied the vacancy rates were that high. According to its figures, it has an occupancy rate of 93-94 per cent throughout Harbour City.
It said it could not provide a breakdown of occupancy rates in the hotel shopping arcades.
Tenants said even greater rent cuts were required.
They said many electronics shops in the malls had asked for reductions of as much as 50 per cent on their rent levels .
The Wharf spokesman said that none of the retail leases for its Times Square building in Causeway Bay were up for renewal this year.