Hong Kong’s retail property market is now experiencing some of weirdest phenomena of recent times, as landlords of ground-level shops not only slash rents significantly, but also offer extremely short tenancy periods, even in prime locations.
The trend comes at a time when the battered retail sector, which heavily relies on tourism spending, is showing few signs of recovery.
“During the market boom, such arrangements would have been out of the question as most prime spaces were normally snapped up quickly, and achieved high rents,” said Michael Chik, managing director of agency Sheraton Valuers, which focuses on retail shop transactions.
Retail leases are normally renewed every three years, he said.
“It is rare to see major retail chains go for a short term, as they usually spend a lot on decoration and take time to recover their costs,” said Chik, adding that the more-flexible lease conditions underline just how cautious the market outlook remains, for both retailers and landlords.
Chik said some short-term leases for street-level units are being signed for 50 per cent less than longer-term contracts.
“For landlords, it is better than leaving their shops empty,” he said.
UBS is forecasting luxury retail rents, meanwhile, could tumble 20 per cent between now and 2017, and larger spaces for mass retailers could drop 10 per cent in rent during the same period.