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Hong Kong property
Business

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

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Hong Kong’s retail landlords are considering raising rents for the first time in two years amid an improving economy. Photo: Sam Tsang
Lam Ka-sing

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.

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Retail landlords have started engaging tenants in discussions on rent increases for the upcoming lease renewals since Lunar New Year, said Lawrence Wan, senior director for advisory and transaction services in retail at CBRE Hong Kong. “These new or renewed leases might see a freeze for the first year, followed by a mild increase of around 5 to 10 per cent for the second and third years” amid a predicted recovery for the city’s economy and revival in cross-border tourism, he said.

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Hong Kong’s economy expanded by 7.9 per cent in the first three months of the year, the biggest quarterly growth in 11 years which also ended six quarters of recession. Given the economy continues to recover from the pandemic, the government expects full-year growth to be at the upper end of the forecast of between 3.5 per cent and 5.5 per cent. Hong Kong’s retail sales have also continued to recover, with retail sales in the first four months of 2021 estimated to have grown 8.5 per cent compared to the same period last year.
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Some landlords think that the worst is over, said Martin Wong, head of research and consultancy for Greater China at Knight Frank.

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