Hong Kong landlords offer deep discounts on short-term retail leases, hope to raise rents in the next market rebound
- Leasing terms suggest individual retail landlords are banking on recovery in sales once Hong Kong reopens its border
- Retail sales shrank 14.6 per cent in February, the worst since a 23 per cent slump in July 2020, according to government data
The owner of a 10,000-square foot store in Sai Yeung Choi Street in Mong Kok, for example, is offering the property at almost 60 per cent below its current rate, when its existing tenant, local fashion house Izzue, departs later this month.
The store, located a stone’s throw from the Mong Kok railway station, is being marketed at HK$1 million (US$127,480), or HK$96 per square foot, to attract new tenants, said Tony Lo Chin-ho, chief executive of Midland’s ICI Property unit. That works out to about half compared with HK$2.4 million under the existing lease.
“The landlord will only offer low rents in the first two years, and the third year will be subject to negotiations,” Lo added.
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Hong Kong’s government is easing parts of its Covid-19 curbs for select businesses from April 21 as infection cases declined. Retail landlords are betting on near-term border reopening and a recalibration of strategies as other regional governments adapt to living-with-Covid strategies.
China’s uncompromising zero-Covid policy has reduced mainland tourists to a trickle over the past two years, sending rents for high-street large shops in core areas tumbling by up to 70 per cent since the onset of pandemic in early 2020, according to agents.