Economy, rent surge slow shops market

PUBLISHED : Wednesday, 05 October, 2011, 12:00am
UPDATED : Wednesday, 05 October, 2011, 12:00am


Leasing and sales of retail properties have slowed in the past two months as market turmoil and steep rises in rents and prices bite, agents say.

'There are many uncertainties in the market, such as the slump in stock prices and concerns over economic growth, and people are worried about the economy and outlook for the property market,' Roy Chan Chung-wing, an assistant director at Ricacorp (CIR) Properties, said.

Three clients seeking retail space decided to put their plans on hold in the past week, Chan said. One was looking for between 3,000 and 4,000 square feet for a restaurant but deferred his plan as he was worried that consumers would be affected by the fluctuating markets.

'Rents have risen a lot, and clients that runs a small business such as a restaurant or a boutique worry that their revenues would only just manage to cover rents,' Chan said. 'Rising food and labour costs are also eating up their revenues.'

Property owners, however, are still positive about the economy and the leasing market, buoyed by the continued influx of mainland tourists and ongoing growth in retail property prices and rents.

As a result they are not willing to lower rents to meet tenants' prices, Chan said.

Some tenants with three-year leases may have secured relatively low rents when they signed contracts in 2008 during the financial crisis, but landlords are now seeking hefty rises in rents as their leases expire.

'If this trend continues we may see more empty premises on the streets,' Chan said.

Raiky Wong Wai-kei, a sales director in Centaline Commercial's retail properties department, said many tenants were not renewing their leases because landlords were seeking rent increases of 100 per cent or more in core districts such as Causeway Bay and Tsim Sha Tsui.

Rents in less prime locations have risen by between 5 per cent and 10 per cent.

'Some owners are so aggressive that not all tenants can absorb the rise. Therefore it may take longer for them to get the premises occupied again,' he said.

'For example, it takes three weeks in core districts or as long as three months in non-core areas.'

Sales of retail properties dropped at least 50 per cent last month to between 200 and 300 transactions, compared with about 600 deals in May and June when the market was rosy, Wong said.

The slump in sales was due to a tightening of bank loans and the uncertain global economic environment, he said. But he believes more retail space will be taken up this month or next month to catch the Christmas shopping season.

Pierre Wong Tsz-wa, chief executive of commercial property agency Midland IC&I, said demand for space in core retail areas remained active, although the market for less prime locations might have slowed slightly.

'Unlike small tenants who are less resistant to sudden economic changes, there are some chain stores using this period to look for premises now,' Wong said.

Helen Mak Hoi-lun, retail services director at property consultancy Colliers International, believes leasing activities in core shopping areas such as Central and Tsim Sha Tsui will remain unaffected by rising rents and the latest stock market turmoil.

She said this was because supply had been limited while demand remained strong thanks to the increase in mainland shoppers in Hong Kong.


The drop in sales of retail properties last month compared with May and June