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Tuesday, October 14, 2014, 08:59

Shop rentals may see 10-20 percent decline this year

By Agnes Lu in Hong Kong

The ongoing student protests will cast a long-term shadow on Hong Kong’s shop rental market, with market estimates of a 10-20 percent drop in rentals by the end of this year, according to Centaline Commercial.

 However, the sale transaction value reached a new high in the third quarter of the year due to staple transactions.

 “For the four core consumption districts — Admiralty, Wan Chai, Causeway Bay and Mong Kok — we estimate there’ll be a 70 percent fall in shop rental cases this month alone,” Stanley Poon, managing director of Centaline Property Agency (CPA), said on Monday. “Normally, we see about 200 shop leases being closed monthly through our agencies, but now we can only expect 40 to 50 cases this month,” he said.

 September and October traditionally mark the peak shop rental season as retailers roll up their sleeves for the approaching Christmas and Chinese New Year holiday season. Thus, the negative impact from the current political unrest will most likely be felt in the coming quarter, triggering a 10-20 percent decline in rental levels by the end of this year.

 The stress on the market is evident even at prime commercial locations. For instance, a ground-floor shop on Yee Wo Street, Causeway Bay — a key shopping district on Hong Kong Island hit by the protests — has just been rented out for HK$380,000 ($48,977) a month — a 30-percent drop from the asking price of HK$550,000.

 “In the wake of the ‘Occupy Central’ campaign, more people have adopted a wait-and-see attitude in the market. Some cases of shop leasing in core consumption districts have had to be suspended during negotiations, which have not resumed so far. We’ve also learned that some retailers demanding that landlords cut current rents as well,” said Raiky Wong, director of retail at CPA.

 According to Centaline’s latest figures, the total retail lease volume in the third quarter of this year stood at 1,148 cases, amounting to HK$142 million — the first decrease from a year ago and represents a 21-percent drop from compared with the last quarter. The sales transaction volume saw 326 cases, amounting to HK$13.2 billion, representing a decline by number but a climb in value.

Wong said the good performance in the sales market was mostly due to staple transactions, as the current taxation regulations are more favorable for major investors. “The number of small or short-term investors is dwindling while long-term investors keep flooding in,” he said.

Nevertheless, the number of shop buyers and sellers is projected to fall by 60-70 percent this month. Poon warned that the leasing-and-sale market will not recover very soon even after the protests die down as it has already been affected by a depressed retail sector and slow growth momentum as the number of mainland tourists shrinks.


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