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Cold Winter in Retail Market; SHKP Exempts Merchants from Rent of Closing Days.

Image Caption
Under violent impact, the quarterly rents for street stores fell more than 10%, the worst in 21 years.

Hong Kong Wen Wei Po (By Ngan Lun-lok)

Affected by a series of violent demonstrations, the retail industry in Hong Kong entered its cold winter in advance. SHKP, as one of the large shopping mall owners in Hong Kong, rarely issued a statement yesterday to announce exempting merchants from the rent of closing days that had been closed for the whole day, hoping to ease merchants’ operating pressure. In fact, the continued shrinkage of the retail industry has dragged down the rent. Agent data shows that the overall store rents in last quarter had fallen quarter-to-quarter by more than 10%, the largest quarterly decline in more than 21 years, and the industry expects it to fall another 5% to 10% this year. The violent demonstrations also badly hit the business environment in Hong Kong. According to a survey conducted by the American Chamber of Commerce in Hong Kong, 46% of members are pessimistic about the long-term prospects of Hong Kong, and 24% consider reducing their business or even moving out of Hong Kong.

SHKP issued a statement yesterday that in the recent social events, shopping mall merchants were affected to varying degrees, and some of the shopping malls of the Group had closed for business all day, so the group decided to exempt the rents and other related expenses of these affected merchants on the closing days, hoping to ease the merchants’ operating pressures and tide over the difficulties. SHKP stated that it will continue to implement various measures to improve the business environment, at the same time appeal to the SAR Government to take the initiative to provide relief measures for large and small owners and merchants to help the industry out of the trouble.

The performance of the retail industry is deteriorating in recent months and the situation is worrying. CB Richard Ellis issued a report yesterday and pointed out that the Sino-US trade war and local social conflicts have brought a negative impact on the local consumption sentiment in the third quarter. Total retail sales amount in July and August fell by 17.2% year-on-year, which is expected to be the largest quarterly decline since the fourth quarter of 1998. The total number of visitors to Hong Kong in July and August fell by 22.6% compared with the same period last year, which should be the largest quarterly decline since the SARS outbreak in 2003.

The retail market may be in a long downturn.

The Hong Kong Consultant and Trading Service Shop Senior Director of CB Richard Ellis, Wan Wan-keung expresses, recent demonstrations have spread across all regions that are unlike the political turmoil in 2014, so the impact on retailers and homeowners is larger. If the current conflict continues, the retail market will likely fall into a long downturn. As for the overall street store rent sharply falling by 10.5% quarter-to-quarter, it is the largest quarterly decline since the first quarter in 1998. Rents in shopping malls are flat, and this company expects the overall rent of street stores to fall by another 5% to 10% within this year.

The retail industry bears the brunt since visitors to Hong Kong disappeared.

Another international property consultant, Savills, also released the Retail Leasing Report of the third quarter yesterday and also pointed out that the Sino-US trade war and recent social unrest have had a devastating impact on the number of visitors to Hong Kong, and the retail industry among many affected industries bears the brunt. It is expected that current market conditions may continue until next year if there is no solution in the near future. This company points out that, the latest retail sales data in August was very severe, which had a greater decline than that during the SARS period in 2003, and the retail sales of luxury goods fell by an average of more than 50% year-on-year. But as people reduce their meals outside, the food and beverage industry has not been spared.

The rent for street stores in Causeway Bay sharply fell 18% quarter-to-quarter.

In the third quarter, the rents of street shops in all major commercial districts in the Hong Kong Island, Kowloon and the New Territories all experienced double-digit declines, and it was the most serious in Causeway Bay (down 17.5% quarter-to-quarter), mainly due to the closure or severe damage to some shops on weekends and public holidays, also the number of visitors to retail shops had been welcomed by mainland tourists decreased significantly. The street shop rents in Tsim Sha Tsui (down 15% quarter-on-quarter), Mong Kok (down 15% quarter-to-quarter) and Central (down 13.9% quarter-to-quarter) also were recorded by different levels of declines. The overall rental of shopping malls in Hong Kong fell by 14.2% within the quarter, while the rental decline for shopping malls and restaurants in the people's livelihood area such as Tseung Kwan O were relatively smaller, and the retail sales were not much different from that in the previous quarter.

The Managing Director and Head of the Leasing Department of Savills Hong Kong, Lai Tat-chi points out that, some street shop owners are currently providing short-term and temporary rent reductions ranging from 15% to 20%, with a reduction period in three months or more, while shopping mall owners have lower willingness to reduce rent but tend to wait and see.

American Chamber of Commerce: Nearly half of the members are pessimistic about Hong Kong.

The continued violent demonstrations, in addition to scaring passengers and ruining the retail industry, also badly hit the business environment in Hong Kong. According to a survey conducted by the American Chamber of Commerce in Hong Kong last week, 46% of more than 120 members were pessimistic about the long-term prospects of Hong Kong, an increase of 12 percentage points from the July survey. At the same time, 61% of the companies faced medium to great impact from the recent situation on their business, and 31% of the members said that Hong Kong's risk is high or very high, while 24% of companies consider reducing even moving their business away from Hong Kong. Respondents stressed that Hong Kong's status as an Asian financial center cannot be replaced. However, the increased risk, in the long run, may eventually move foreign capital away from Hong Kong, and Singapore is still the first choice for backup.
Translated by 28Hse.com . All right reserved.