Landlords of Hong Kong’s “Ginza-style” high-rises are struggling to retain tenants as restaurants and bars – normally their bread and butter – battle to stay afloat during the pandemic.
Four such buildings – typically found on narrow lots with one retail business on each floor reached directly by a lift – in the commercial districts of Mong Kok, Tsim Sha Tsui and Causeway Bay were largely empty when the Post visited on Tuesday.
A total ban on evening dine-in services as part of government measures to contain Covid-19, and a drop in demand as Hongkongers stay home to avoid infection, has brought many of the city’s restaurants, cafes and bars to financial breaking point and left them unable to pay the rent.
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“Eateries can only open until 6pm and can only do business in the lunch hour, but since many people are working from home now, lunch-hour sales have been greatly affected,” said Jeannette Chan Wing-wai, senior director of retail at JLL in Hong Kong. “You can’t replace those sales with takeaways.”
Named after the bustling shopping district of Ginza in Tokyo, the slender commercial towers grew in popularity over the years as rents soared for street-level retail spaces in prime shopping districts, where land is in short supply.
Half of the 18 levels used for retail at Ladder Dundas, on Mong Kok’s busy Nathan Road, were unoccupied according to a floor directory and inaccessible by lift.
Eight units at Causeway Bay’s 28-storey Bartlock Centre were seeking tenants. Eight floors of Tsim Sha Tsui’s H8 building were labelled “closed” and were inaccessible by lift during the evening dining hour.
Chan said landlords were reluctant to reduce their asking rent, meaning that businesses that cannot keep up have no choice but to shut up shop and leave.
“Compared to a year ago, the asking rent has not gone down that much. Landlords may ask tenants to make an offer, and if the tenants’ brand is considered good, they might reduce the actual rent.”
“Ginza-style buildings with most tenants in the food and beverages business, located in tourist districts, were especially affected by vacant floors, as local customers were unable to replace the flow of tourists that used to consume there.”
Some landlords, foreseeing problems, are trying to give their tenants a helping hand.
H Development, which owns Park Aura, a new 25-storey Ginza-style tower in the Tin Hau residential district, has covered the costs of certain amenities for its tenants, helping to keep them in business, according to Cushman & Wakefield, the asset manager of the property.
“From hardware design and lighting to basic facilities in each store, such as air conditioning, fire safety equipment, drains and air ventilation, [the developer] has provided them all to the tenants,” said Kevin Lam Ying-wai, executive director and head of retail services at Cushman & Wakefield in Hong Kong.
A takeaway food hall with 14 stalls run by small businesses is located on the ground and first floors to lure customers into spending more at other establishments accessed by lift, he said. The developer has negotiated with payment gateway providers, paid for licence consultancy and applied for food factory licences, removing the need for tenants to negotiate such contracts separately.
“These small shops are limited in what they can do. When we settle these things with a centralised approach, we help them with their business. Simply put, they are less burdened with costs,” said Lam.
While H Development’s plan to take on some of the tenants’ initial costs to set up shop came about before the pandemic struck, the recession has highlighted the advantages of the retail model, he said.
Lam said the market downturn during the pandemic had slowed the rental process.
The third to the 24th floors, with a lettable floor area of 1,442 sq ft to 1,920 sq ft each, are reserved for retailers. Mid-level floors are asking for at least HK$40 per square foot of gross floor area, and the combined 23rd and 24th floors are asking HK$80 per square foot. The rent is negotiated individually between tenant and developer.
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