Landlords offer rental cuts amidst worsening economy: report

Retail rents in prime areas could fall by as much as 10% in 2019.

Retailers are driven to negotiate rental reductions with landlords as deteriorating business prospects plague Hong Kong amidst social and economic turbulence, according to a report by Knight Frank.

Earlier, data from the Census and Statistics Department revealed that retail sales dropped 6.7% YoY in June, punctuated by a 17.1% YoY decline in luxury retail sales, attributed to ongoing trade war and “worsening” social turbulence. 

Shopping mall D2 Place in Cheung Sha Wan has offered a one-off rental subsidy equivalent to 20% of one month’s rent in an attempt to support its existing tenants.

In total, retail rents in prime streets especially Central are expected to fall up to 10% for the whole year, according to David Ji, Knight Frank’s director and head of research and consultancy in Greater China.

The report also noted the retreatment of foreign fashion brands from the island. Italian luxury brand Prada is reportedly considering surrendering its existing lease of it 15,000 sqft store at Russell Street in Causeway Bay, which has a monthly rent of $9m. The fashion brand recently released interim financial results showed a 5.1% YoY decrease in net sales performance attributed to the ongoing protests and the unfavourable fluctuation of the renminbi.

Korean fast-fashion brand SPAO has also announced that it will shut down its Hong Kong branch whilst UK fashion chain Jack Wills Hong Kong has permanently shuttered its five Hong Kong stores after it was bought by Sports Direct for $122.78m.

The report also noted that the restaurant sector has seen the worst performance in 10 years, with the value of restaurant receipts and purchases falling for the first time since Q3 2019. C&SD earlier released data reporting that restaurant receipts fell by 0.4% YoY in the second quarter.

“Consumer confidence should remain weak in the short term amidst continuing social tension and the worsening economic outlook,” Ji further commented.

Photo by Minghong (Wikimedia Commons)