Fast fashion chain H&M is estimated to contribute 10 per cent of Hang Lung Properties’ rental income in Hong Kong this year but the developer faces a decline in retail rents in the mainland, Morgan Stanley says. The US investment bank estimated the developer’s rental income in Hong Kong would edge up 4 per cent to HK$3.7 billion this year. H&M alone would boost Hang Lung Hong Kong rental income by 3 per cent, it said. The Swedish fast fashion chain opened two outlets at two shopping malls owned by Hang Lung Properties in three months. The chain opened its largest flagship store in Asia, with shop area of 47,000 square feet, at Hang Lung Centre in Causeway Bay at a monthly rent of HK$11 million, or HK$213 per square foot in early November, according to market sources. The chain also opened a 55,000 square feet shop at Gala Plaza in Mong Kok in January at an estimated monthly rent of HK$9 million, or HK$194 per sq ft, people familiar with the deal say. However, the developer, which owns eight shopping malls on the mainland, would see its retail rental on the mainland fall 7.3 per cent from last year to HK$3.88 billion this year, Morgan Stanley said. It owns shopping malls in Shanghai, Shenyang, Wuxi, Dalian, Tianjin and Jinan. Morgan Stanley attributed the fall in mainland rental income to negative rental reversions in second-tier malls and said renovation of Hang Lung’s two Shanghai malls could affect sales. In Shanghai, renovation at Plaza 66 started in September and is scheduled for completion by mid-2017, while Grand Gateway 66 will start refurbishment later this year. “The two Shanghai malls accounted for 50 per cent of mainland rental income in the financial year 2015,” Morgan Stanley said in a report. No new mall opening until 2018 would also affect short-term revenues and earings per share growth. The next mall due to open will be Spring City 66 in Kunming, which is scheduled for completion in 2018. In addition, rental income at Forum 66 in Shenyang fell 21 per cent year on year in the second half of 2015 and Center 66 Wuxi registered a fall of 37 per cent. Both malls saw negative rental reversion and retail sales declined 3 per cent year on year , it said. Morgan Stanley said it expected Hang Lung Properties’ core earnings would fall 6.6 per cent to HK$4.09 billion this year.