Hong Kong’s mall owners push back at tenants’ pleas to cut rents even as retail sales shrink amid unrelenting protests

Pearl Liu

Hong Kong’s leading mall owners are looking at various options to help struggling tenants amid the unrelenting protests, but most of them are reluctant to commit to rent cuts even after the city recorded its worst monthly sales in August.

Although Sun Hung Kai Properties, Wharf (Holdings), Hysan Development, Swire Properties and CK Asset, which together own 40 shopping centres in the city, have come up with proposals, including increasing promotional activities to postponing rental payments, retailers and market observers say it falls far short of what is needed to keep them in business.

So far, only Hysan and Swire have confirmed rent cuts.

“Temporary rental adjustments have been offered as one possible solution,” said Hysan Development, Causeway Bay’s biggest landlord, one of the worst affected districts in the protests.

Tear gas is fired in Tuen Mun on September 21 during the anti-government protests. Photo: Sam Tsang

Hysan owns nine shopping centres, including Hysan Place and Lee Garden One, Two, Three, Five and Six in the popular shopping district.

Hysan’s move on Wednesday came after Swire said late last month that it would cut rents at its flagship Pacific Place mall in Admiralty, another epicentre of the protests.

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With tourists staying away from the city, retail sales fell 23 per cent year on year to HK$29.4 billion (US$3.76 billion) in August, according to the Census and Statistics Department.

A government spokesman said it was the steepest year on year decline by value for a single month on record, even worse than in September 1998 during the Asian financial crisis.

The 9,000-member Hong Kong Retail Management Association (HKRMA) warned the worst was yet to come and October’s retail sales could reach a new low as the anti-government protests showed no signs of abating.

Wharf Holdings, the owner of Harbour City in Tsim Sha Tsui and Times Square in Causeway Bay, told the Post that the social unrest was “hurting business in every sector including our shopping malls and tenants to varying degrees” and it was “finding ways to tide over this difficult time”.

Shops at V City mall in Tuen Mun are closed during anti-government protests in the area on September 21. Photo: Felix Wong

CK Asset’s executive director Justin Chiu Kwok-hung said that the company “will see what we can do to help … when the time’s right”.

One of his suggestions include holding promotional events at its 15 shopping centres to boost sales.

Meanwhile, Sun Hung Kai Properties, which owns New Town Plaza in Sha Tin and V City in Tuen Mun, said that it was helping tenants rebuild their shops damaged during the protests.

Although the developer did not elaborate on the kind of help it was extending, property consultants familiar with the developments said SHKP was offering tenants an option to restructure tenancy leases.

“Tenants can pay less now but the difference will be settled in the remaining period of the agreement,” said Lawrence Wan, head of advisory and transaction services for retail at CBRE.

We have opened up discussions with landlords on retail outlets’ rental adjustment, however, [there has been] no positive feedback yet

Nancy Wong, executive director and deputy CEO of Lukfook Group

Helen Mak, senior director and head of retail services at Knight Frank, said that some landlords were buying products or gift coupons from their retail and restaurant tenants and giving them to their customers as gifts instead of directly lowering rents.

But retailers have been asking for more concrete steps.

“We have opened up discussions with landlords on retail outlets’ rental adjustment, however, [there has been] no positive feedback yet,” said Nancy Wong, executive director and deputy chief executive of Lukfook Group.

The HKRMA too has repeatedly called on both individual store owners and large developers to revise down rents by half for six months, saying that its members were yet to see light at the end of the tunnel.

Separately, S&P Global Ratings said in a report this week that it expected retail rents to dip slightly next year, but rents could worsen further if market sentiment does not stabilise.

“Any rent adjustments related to the recent protests will only affect the relatively small portion of leasing coming due in the near term,” the credit rating agency said.

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