ExclusiveHong Kong retail rents might need to be halved for tenants, landlords to survive coronavirus outbreak, developer says

Nobody will want to start a business in these few months unless rents are so attractive, Tai Hung Fai Enterprises’s Edwin Leong says

The company has more than 1,000 tenancy agreements across Hong Kong

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Tai Hung Fai is providing relief to tenants on a case-by-case basis, allowing retailers to renew contracts with measures such as lower rents and rent-free periods of up to three months. Photo: Winson Wong

Published: 8:00am, 3 Apr 2020Updated: 11:52pm, 3 Apr 2020

Hong Kong’s retail landlords might have to cut rents by 50 per cent to attract new tenants amid a worsening outbreak of the novel coronavirus, one of the city’s richest developers said.

“For these few months, you’ll probably see a 50 per cent cut in rents for the retail sector, or even more,” Edwin Leong Siu-hung, founder of property developer Tai Hung Fai Enterprises, said in an interview. His company has more than 1,000 tenancy agreements all over Hong Kong, including offices, serviced flats, warehouses and about 200 shops. With an estimated net worth of US$4.5 billion, he is Hong Kong’s 19th richest man this year according to Forbes.

“Nobody will want to start a business in these few months, and nobody’s going to open a retail outlet … unless the rents are so attractive. Otherwise, you just won’t do it,” he said.

“On a whole year basis, I wouldn’t be surprised to see a 20 per cent cut in rents for the retail sector.”

Hong Kong’s February retail sales fell 44 per cent from a year ago to HK$22.7 billion (US$2.9 billion), for a 13th consecutive month of declines, according to government figures released on Tuesday. It was the steepest single-month fall on record, caused mainly by Covid-19’s impact on tourism and spending, a government spokesman said. This worsens the outlook for a sector that has already been battered by months of anti-government protests that broke out last summer. Carrie Lam Cheng Yuet-ngor, Hong Kong’s leader, too came out on Tuesday and urged that landlords waive shop tenants’ rents.

Tai Hung Fai has provided relief to its tenants on a case-by-case basis, allowing retailers to renew contracts with measures such as lower rents and rent-free periods of up to three months. “We’re helping out with the cash flow for them to pay the rent. We will cancel old tenancy agreements and do a new one with them, with certain rent-free periods at the beginning, hoping to tide over this uncertain period,” Leong said.