Monday, February 24, 2020
 
Columnist
Martin Hennecke

Commercial tenants win rental cuts of up to 50pc
 
13/02/2020
 
Hong Kong's biggest landlords have begun to cut rents for their commercial tenants, with Sun Hung Kai Properties (0016) cutting shopping mall rents by 30-50 percent for February as Hong Kong street shop vacancy rate is expected to reach a record high. This comes a day after the Real Estate Developers Association of Hong Kong, which has major local developers as its members, said it will explore more relief measures with tenants on a case by case basis. SHKP expects the relief measures will help ease the operating pressure of a large number of its tenants, especially those in the catering sector. The developer said its businesses, including residential property sales and hotel occupation, have been affected by the coronavirus outbreak since January. Wharf Real Estate Investment Company (1997) was reported to have announced a similar move for its Harbour City shopping center, cutting this month's rents by half. A spokesman replied that they are unable to disclose details of the lease agreements or any variations due to confidentiality agreements signed between the mall and its tenants. Other landlords including Swire Properties (1972) and MTR Corporation (0066) said they would continue to provide rental-relief measures that have been in place since last year, when the social unrest started. A spokeswoman from MTRC said the company is collecting sales data so far this year from its small tenants to explore relief measures. Centaline Commercial has recorded only 10-20 new contracts for street shops so far this month, and the agency predicts the vacancy rate to peak during February-March. In other news, Harbour Centre Development (0051) under Wharf REIC warned its net profit last year could fall over 80 percent due to deteriorating market conditions in the second half of last year. Also, Gucci-owner Kering said the virus has compounded a plunge in sales in Hong Kong due to months of anti-government protests. It had seen fourth-quarter sales in the SAR halve. Sportswear retailer Bossini (0592), meanwhile, warned its net loss for the second half of last year may surge 2-3 times to as much as HK$105 million due to weaker sentiment.

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