Hong Kong retail landlords expect slow recovery even as travel restrictions ease and latest vouchers boost retail spending

Market watchers do not expect an immediate impact from a reduction in quarantine requirements, though new round of vouchers should boost spending

With rents at 1988 levels, tenants should extend agreements only if they are confident local customers can sustain operations, property experts say

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Pedestrians pass retail locations for rent in Hong Kong’s Causeway Bay district. Photo: SCMP / Nora Tam

Published: 8:30am, 9 Aug 2022

Hong Kong’s pandemic-battered retail market will not recover overnight despite the city easing travel restrictions, and tenants should extend their agreements only if they are confident local customers can sustain operations, property experts said.

“Rent will remain at the current level until we see the sector show major signs of recovery,” said Barrie Chan, senior director of retail at Savills.

Hong Kong’s rental index is currently 75.3 per cent lower than an all-time high reached in the third quarter of 2014, according to JLL. That puts rents at a level last seen in the second quarter of 1988.

Right now Hong Kong businesses are only getting revenue from local customers, and tenants need to be confident this is sustainable in the short term, Chan said.

Shoppers flock to a shopping mall in Kwun Tong on August 7, 2022, the day Hong Kong started distributing the latest round of payments in its Consumption Voucher Scheme. Photo: SCMP / Sam Tsang

Landlords of shopping malls and department stores are willing to make concessions to keep tenants in place by offering short-term leases and pop-up stores, according to Michael Cheng, mainland China and Hong Kong consumer markets leader at PwC Asia-Pacific.