Hongkong Land says rents in its retail portfolio in Central, which have fallen by 20 per cent since last year, face a further correction unless there is a rebound in retail sales activity. Executive director Ian Hawksworth said the next three to four months were critical to the retail trade. 'If there is a fall in the level of sales running up to Christmas, that could lead to further corrections in rents,' he said. It was difficult to say just how much further rents in the portfolio would fall. 'Retail rents are a function of sales,' he said. 'I really don't know at the moment, but by the end of this year it will be more apparent if there is a support level for sales. That would mean that rentals will firm. But it is too early to say.' The drop in sales volume in the portfolio year-on-year had ranged from zero in some areas to as high as 50 per cent in Swire House. The average drop in sales was 10-30 per cent, which was lower than the average in Hong Kong generally, he said. About one third of the retail tenants renewing their leases this year would get a cut in rent, he said. 'We are going through a period of negative rent reversion. It depends when they signed up,' Mr Hawksworth said. 'The [rent cuts for] people who are renewing are going to range between 10 [per cent] and 20 per cent.' A break on leases was being extended to tenants who still had a few months left on their leases, Mr Hawksworth said. Tenants with six months left were being allowed to renew at a cheaper rate, although the rent cut was not as high as for tenants whose leases had run their full term. Some tenants also were renewing under a new rental scheme. Previously Hongkong Land charged a straight monthly rent. Now with the downturn in retail sales, some tenants had opted for a lower base rent, combined with a percentage of turnover. 'We are working with our tenants to ensure that The Landmark, the Prince's Building and Central as a whole remain fully occupied so that people can have a viable platform in which to trade,' he said. 'The economic conditions have deteriorated. But if one looks at the type of retailing that is going on in Central, then this sector is holding up better than others.' There had been a net demand from retailers wanting to locate in the Land portfolio areas, despite the overall downturn. However, Mr Hawksworth said he saw little upside to the retail situation facing landlords in Hong Kong and it could be another 18 months before there was an upswing in retail rents. 'I think retailers are going through a tough period where the opportunity for them to increase their sales is limited,' he said. 'If they can't increase their sales, then rents won't increase.' Overall, Mr Hawksworth said the decline in portfolio rents would slow because the level of retail sales was sustainable. Meanwhile, the company announced that Swire House would be vacated this month, with demolition due to begin early next year.