Retail rift: Hong Kong shops plead for rent relief, landlords see improving market
As closures continue despite rising retail sales, landlords and operators have starkly divided views on the retail leasing market
Many tenants say that despite racking their brains for solutions, their businesses remain stagnant. They are losing money because of constant price cutting to attract customers, a situation they attribute to the broader economic climate. Many hope for rent reductions of 20 to 50 per cent to ease their woes.
Landlords, however, believe the market is recovering and are willing to offer only limited cuts, typically between 10 and 20 per cent. In some locations including certain shopping centres, they are even raising rents.
The operating environment was “poor”, said Michael Leung, chairman of the Association for Hong Kong Catering Services Management, who also owns several restaurants. “There are very few people on the street by 8pm, and the industry is plagued by cutthroat price wars. Over 500,000 people leave Hong Kong for the mainland during long holidays, dealing a severe blow to the catering industry.”
Total monthly expenditures for his five restaurants – including rent, air-conditioning charges, and management fees – amount to HK$1.6 million (US$204,000), accounting for 20 per cent of total expenses. He believes a 20 to 30 per cent rent reduction is necessary for survival.
Leung closed the Lucky Dragon Palace Restaurant – known as a “TV Stars’ canteen” – in October, ending its 45-year history.
Edward Chan, founder of Hong Kong-based appliance maker German Pool, said that online sales have dealt a severe blow to bricks-and-mortar stores. He attempted to negotiate rent reductions but had not yet reached any agreements, he added.