Hong Kong’s retail landlords consider increasing rent for the first time in two years amid ongoing economic recovery
- Retail landlords have started engaging tenants in discussions on rent increases for the upcoming lease renewals, say market observers
- Tenants however say that landlords must hold back on the rent increases as they were yet to recover fully from the slowdown
With Hong Kong’s economic recovery gathering pace and domestic consumption improving, retail landlords have started mulling rent increases for the first time since the correction started two years ago in the wake of the social unrest.
While landlords of shopping centres and street shops seem optimistic and expect retailers to receive a boost from mainland tourists following the eventual opening of cross-border travel, tenants, however, remain cautious, with many saying that business is yet to recover from levels before the protests started in mid-2019.
Market observers, however, expect only a nominal increase in rent, noting that a stop to rent concessions by landlords is a good indication rents may be on the way up.
Hong Kong eases Covid-19 curbs, tells customers to use contact-tracing app at reopened premises
Some landlords think that the worst is over, said Martin Wong, head of research and consultancy for Greater China at Knight Frank.
“As retail sales have returned to positive growth, they have had internal discussions to increase the headline rents,” said Wong.
Stuck with 20,000 sq ft of prime space on Russell Street, Hong Kong landlord splits it into smaller chunks to find tenants
As the pandemic has stabilised locally and restrictions have eased, the scope for discussions on lease renewals with tenants is much better compared to six months ago as their prospects have improved, George Hongchoy, chief executive of Link Reit, said last week.
Hong Kong retailers should create experiences for local shoppers to survive with ‘zero tourists’
But small business owners beg to differ, saying they were worried that landlords were jumping the gun as their operations were yet to stabilise from the disruption brought about by the pandemic.
Among them is Vincent Wong. The owner of a music centre in Tai Kok Tsui said he could be paying higher rents when his lease comes up for renewal in September.
“We had asked for a rent cut but the landlord turned down our proposal. We are now requesting them to freeze the rents for one year, but we have not heard back,” said Wong.
“We lost as much as 50 per cent of students at the beginning of the pandemic. We see students gradually coming back but the business is still at two-thirds of the pre-pandemic level.”
Additional reporting by Peggy Sito