Hong Kong developers feel the pain from Covid-19, social unrest as rental incomes shrink and tenants surrender office space
- Henderson Land said its total rental income dropped 10 per cent as a result of Covid-19
- Hang Lung Properties warns financial results for 2020 may be adversely affected by virus outbreak
Hong Kong developers are feeling the pain from Covid-19 and the anti-government protest movement, with shrinking rental incomes and tenants surrendering office space as the economy spirals into a recession.
Henderson Land Development, the third largest builder in Hong Kong, said total rental income across its portfolios, mainly in the office sector, had dropped around 10 per cent as a result of the health pandemic.
IWG takes over US rival WeWork’s abandoned office space in Causeway Bay
“But overall there is still strong demand for office space in the International Finance Centre,” said Lee. “Once a tenant ends their lease, many clients show up quickly intending to rent the office space.”
The developer’s rental income from office space in China had also dropped more than 2 per cent, or around HK$20 million, said co-chairman Peter Lee Ka-kit. He said the Chinese government’s swift response to the virus outbreak had helped minimise the losses.
“We have been providing rent relief to [shopping mall] tenants facing operating difficulties since February, with rent reductions ranging from 20 to 60 per cent, and we will continue to do so. We hope to get through these difficult times together with our tenants,” said Martin Lee.
Retail sales in Hong Kong have been pummelled by a double whammy of first the anti-government protests which started last summer, followed by the outbreak of the coronavirus earlier this year. They have been declining for 15 consecutive months, dropping 36.1 per cent year on year in April, according to government statistics released a week ago.
Hang Lung Properties also warned that its financial results for 2020 may be adversely affected by Covid-19, in a filing to the stock exchange after the market closed on Friday.
“The outbreak of Covid-19 has increased uncertainty in the operating performance across the Group’s portfolio of investment properties. If the weak economic environment and leasing market [persist], the appraised values of the Group’s investment properties in Hong Kong and mainland China will likely decrease and a revaluation loss will be reflected in the 2020 financial statements of the Group,” the developer said.
Hong Kong investors shun China Evergrande’s project in Tuen Mun
Commercial property agents have warned that the rent of premium, grade A, offices in areas like Causeway Bay and Wanchai could plunge as much as 20 per cent this year.
Amid the gloomy outlook for Hong Kong’s economy, several big companies have called time on their retail space or office leases as they look to make cuts.
Online travel agency Expedia Group is said to be planning to surrender its lease on 25,000 square feet of office space at The Center in Central, due to expire in June of 2022, according to a report on Monday from the Hong Kong Economic Times.
