Doubts expressed on future of subdivided retail floors

The recent trend of property owners offering subdivided shops for sale may not be sustained because management complexities will make it hard for individual players to survive in a highly competitive retail sector, according to market watchers.

Four shopping centres or large retail floors have or are planning to divide their properties into 500 shops to tap cash-rich investors.

The shops range from 30 to 150 sq ft in saleable area, with the cheapest one costing just HK$900,000, and offering guaranteed rental income of up to 5 per cent in the first two years.

"The trend of selling subdivided outlets comes back whenever the market has ample liquidity," said Michael Chik, a managing director at Sheraton Valuers.

But Chik had misgivings about the investment products, saying owners of subdivided space might have difficulty finding buyers or tenants after the expiry of the guaranteed rental period.

"Only a few malls with subdivided outlets located in prime locations work after the transformation," he said. "We have seen many of these small shops left vacant for years given the poor trade mix. You may see these malls have retailers selling candies next to a Chinese herb doctor and tailor. It is hard to draw shoppers."

The resale of such tiny shops was also not easy because individual owners could not afford to provide guaranteed rental income, he said.