Is Covid-19 the final nail in the coffin for Hong Kong’s Soho bar and restaurant district?
- Landlords need to offer rent-free periods, as discounts are not enough, says restaurateur
- It’s one black swan event after another, Black Sheep co-founder says
Weaving through central Hong Kong is the world’s longest outdoor escalator, which for years has carried patrons from the city’s glass skyscrapers deep into streets full of restaurants overflowing with expats and tourists.
Nowadays, on a quiet escalator ride home one passes by rows of boarded up eateries. On a recent Thursday evening, many sat virtually empty from 6pm to 11pm. A waitress said she serves two to three tables a night, and that her employer has just two more months to survive. She has to take up to three days off a week, instead of one.
Soho, once the heart of Hong Kong’s food and beverage industry offering Indian, Israeli, Korean, Spanish, Italian and Sri Lankan cuisine, has begun to change colours. About half of the shops on Elgin Street are deserted. Down the steep hill and past the wooden hoardings is Staunton Street, where Burger King sat until earlier this month. On this route 21 out of 39 restaurants have shut down.
“As it got quieter and less people were coming up the escalator, we couldn’t survive. We just couldn’t turn a profit,” said Kim Minards, managing director of Enoteca Group, which closed its Spanish bar Iberico & Co in Soho in early January.
This was despite its landlord offering a 20 per cent rent reduction for Iberico’s last three months of business. The tapas bar paid HK$380,000 (US$48,895) a month in rent. Fourteen employees lost their jobs.
Two months earlier, Middle Eastern restaurant Le Souk on Staunton Street closed after eight years. Sales had dropped by 30 per cent, according to owner Dody Wakim, and 11 people lost their jobs when it shut. Sahara still runs two other restaurants, Sahara Mezz Bar and Flaming Frango on Elgin Street, but said he was discussing rent reductions with his landlords, and might have to close in the coming months.
“Definitely, a lot more [restaurants and bars] are going to close. If you take a walk today in Soho, especially Elgin Street or Staunton Street, probably half the street is closed already. And more will come,” he said. “If this [coronavirus situation] continues for the long term, there is no way anyone will survive,” Wakim said, adding that landlords would need to offer rent-free periods, as discounts were not enough.
According to restaurant owners, sales were starting to recover earlier this year, after months of anti-government protests in 2019 put residents off venturing outside on weekends and discouraged tourists – particularly from mainland China – from coming to the city. But just as things were improving, the Covid-19 outbreak struck. Daily visitor arrivals plunged to 3,000 in February, compared with 100,000 in January and 200,000 last year, according to government data.
“The last two weeks of December … first two weeks of January, the market was slowly coming back,” said Syed Asim Hussain, co-founder of hospitality group Black Sheep. “The issue we are facing at the moment has squarely put us between a rock and a hard place again. It’s one black swan event after another.”
The protests and coronavirus have had equal impact on sales and consumer sentiment, according to Hussain. At Black Sheep’s 25 restaurants, none of which have closed, sales are down by about 20 per cent to 30 per cent. “In a business where margins are really thin, that’s everything,” he added.
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“We are in the good times business, and I think there is a dampener on things at the moment. The sentiment, the mood, is pessimistic,” he said. Staying open, rather than profitability, is the priority in this “tough environment”, which he said he expected to last until at least the end of the summer.
But even then, some think the anti-government protests could start again, meaning the industry’s problems will not go away any time soon.
Only those with deep pockets, who can afford rent and employees’ salaries, will survive, said Tina Sekharan, who set up Indian restaurant Cardamon Street, on Elgin Street, in May just before the protests began. It closed on December 30, having gone from being overbooked to seeing a 70 per cent drop in sales. By the end, she could not even cover staffing costs.
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Running down one side of Elgin Street, where Cardamon Street stood, is a row of derelict restaurants spanning numbers 33 to 47, covering an area of 11,775 square feet, owned by Hong Kong developer Henderson Land Development. After redevelopment, the expected floor area will grow by 694 per cent to 93,594 square feet, according to the company’s annual report. Last June it bid for the compulsory sale of more space on the street through a public tender.
Henderson Land did not give information regarding project planning, and only said that it was “confident that the area has a very bright future and good market potential”.
Its presence in the area was a sign of the times that Soho was already losing its attractiveness as a restaurant hub, said Enoteca Group’s Minards. Its flagship restaurant, Enoteca, opened in 2005 and closed in August after the space was bought by the developer and its contract ended.
“I would say it was probably a blessing in disguise, to be honest, that we didn’t have a continuing lease,” Minards said. “It was quite tough. It was the protests, but …[now that] Henderson Land has bought most of [the street] … it just feels a bit of a ghost town. All the old shops are being used by rubbish collectors to put their rubbish in, and it is just all a little bit grim.”
Business for Enoteca Group has instead picked up in Sai Kung, where it runs two restaurants, as people get away from Central on weekends. Its eponymous restaurant in Quarry Bay, however, has seen a 40 per cent drop in sales as people work from home, and it is in talks with landlord Swire Properties to reduce the HK$300,000 rent.
According to Minards, opportunities in the food and beverage industry in Hong Kong will no longer be in Soho, but towards the east of the Island, or in Kowloon’s Kwun Tong district, as businesses move that way for cheaper rents.
Others are, however, still betting on Soho. Vietnamese steakhouse chain El Gaucho opened its first restaurant in Hong Kong, on the escalator, in mid November. The restaurant is already asking for rent reductions and has put plans for opening more outlets in the city on hold, according to David Timm, director for Vietnam and Philippines. But it is not likely to close any time soon.
“It was a long decision for us to come to Hong Kong … we believe in Hong Kong and the show must go on,” he said. “We are going to stick around, and stay as long as we can.”
