What Shop Landlords will do when HK Protests continue

What Shop Landlords can do when HK Protests Continue?

Posted in Blog, F&B News Hong Kong on September 22, 2019 by Lilian Leave a Comment

HK Shop Landlords face with pressing request for Rental Concession. What Shop Landlords can do when protests have no sign to end?

Hong Kong shop rental is leading the world. But it must change when more shop landlords are willing to reduce the rents, in view of impacts by continuous protests.

Whether you’re individual shop landlord or property developer, you should have been asked by tenants for rental concessions. Or you have already offered temporary rental reduction for your tenants.

Shoppers has dropped in major shopping malls after weeks of protests in HK

HK Retailers Call for Shop Rental Concessions

While there is no sign to end after 100 days of protests, increasing number of shop tenants have requested their landlords for rental reduction.

In August, Hong Kong Retail Management Association (HKRMA) was the first to call all shop Landlords to cut rent by 50% for 6 months. According to their announcement, most of the retail business has already dropped half for August this year.

Also, the Association called the Government to take further measures to assist retail business operators so that they can overcome this difficult period.

HK Retailer Management Association call all shop landlords for 50% Rental Cut for 6 months

HK Government Led the Shop Rental Cut

Among all, Hong Kong Housing Authority (HKHA) was the first to announce rental concession for their retail and factory tenants. Starting from October, these tenants can have a 50% for 6 months. In total, about 2,400 retails and 3,300 factory tenancies will benefit from the rental relief.

However, commercial properties owned by HKHA are mainly in residential districts. Rental concessions do not seem to help much for those retailers in major shopping districts in HK.

Prada is planning to surrender a high-street shop in Causeway Bay HK

Pacific Place – First HK Shopping Mall to Cut Rent

Shopping mall landlords are more rigid to reduce rent as compared with individual landlords. As a matter of fact, any rental concession will be applied to all tenants instead of part.

Pacific Place by Swire Properties is located right above Admiralty MTR Station. The mall in Pacific Place provides over 711,000 square feet of retail shop and restaurant spaces.

Shops in HK Pacific Place Mall are closed when Protests happen around

Impact on Shop Tenants by Protests

Due to its proximity to the Government Headquarter Complex, the major road outside Pacific Place Mall is a must-passerby protest’s route. Whenever there are protests in Hong Kong Island, all the shops in Pacific Place Mall will be closed for safety measures.

Even worst, MTR occasionally closes service of Admiralty station while protests protests happen. In such events, no public traffic can reach the Pacific Place Mall.

Indeed, the protests have affected all walks of life. As a result, shop landlords are facing more pressure from their tenants for rental concessions.

Swire Properties is the first Mall’s Shop Landlord to cut rent. Who’s next?

Ripple Effects in HK Property Market

Apart from Swire Properties, we expect that more shop landlords will offer rental concessions to tenants.

As witnessed by Lacrucci, some landlords offer one-third rental reduction for 6 months to new shop tenants, provided that protests will continue after signing the new lease.

Actually, this can be interpreted to provide extra 2 months’ rent-free period for new tenants.

More Shop Landlords in HK rent their vacant shops to pop-up stores

What Shop Landlords can do now?

With increasing shop vacancies, shop landlords will become more eager to rent the shops out. However, can rental reduction help if there is no sign of end of protests in Hong Kong?

Rental concessions can be one of the immediate measures to help retail and restaurant tenants to ride out current difficult period due to prolonged protests.

Shop landlords are also suffering from reduced rental income by rental concession. But it would be far better than having no income for a long void rental period, or substantially cut of new rents.