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Thursday, Sep 24, 2020

HK retailers demand rent cuts amid ‘double blow’

Political protests and the Wuhan virus have driven both locals and tourists away, crippling many businesses

Some 50 retailers in Hong Kong have been taking part in a general strike since Tuesday by pulling down the shutters at their 200 shops across the city. They are demanding rent cuts from their landlords because business in the city, once touted as a shopping paradise that reels in big spenders, has taken a beating from months of political unrest and an ongoing coronavirus epidemic.

Those that have joined the call for rental concessions include some well-known names like French fashion house Lacoste, outdoor wear and footwear brand Timberland as well as popular confection and bakery chain Lady M. Local partners and licensing agents representing these brands say they would not lose income due to the strike as their sales had already dried up.

The bottom fell out of the market in January when the business sentiment, already dampened by Hong Kong’s lingering political tensions and sporadic street scuffles, took another hit when China’s coronavirus outbreak started to spill over into the territory, giving residents and tourists one more reason to avoid the crowds in the city’s shopping areas.

The reality has sunk in that a mere 3,000 visitors entered the protest-riven and virus-stricken city each day on average during the first 10 days of February, lower than the worst levels during the 2003 SARS epidemic, according to the city’s tourism board. To put that in perspective, Hong Kong received no less than 200,000 mainland and overseas visitors on any given day during the first half of 2019.

Malls and precincts once crowded with shoppers during the heyday of retail have fallen quiet. Calls for tax and rent deductions are likely to resonate across the city when an alliance has been formed by some of the retailers and chain stores hardest hit by the double blow.

Their demands are directed at Hong Kong’s realty juggernauts, including Wharf Holdings, Sun Hung Kai Properties and New World Development, which own some of the city’s largest and most upscale shopping arcades and complexes, such as Harbor City, Times Square, ifc mall, New Town Plaza, K11 Musea.

Mall operators now only offer limited rent waivers to tenants to compensate for lost sales if the entire property is closed to all visitors on particular days. They have insisted on sticking to existing leases and contracts when asked to cut rents amid tepid business, despite the fact that the malls are usually devoid of people when they remain open.

Sun Hung Kai has agreed to reduce its baseline rent by about a third for two months for a selected number of shops on its premises, a “hypocritical” offer snubbed by its tenants, while Louis Vuitton has decided to shut its two-storey boutique in the upmarket Times Square mall in Causeway Bay after Wharf refused to slash rent, according to the Ming Pao daily and South China Morning Post.

Wharf declined to comment on the report, but it was said that the cost for the French luxury giant to lease a prime space in Times Square could be tens of millions of Hong Kong dollars each month. LV runs another shop in the same district, as well as a number of other stores across the city.

It has also been reported that the Airport Authority and MTR Corp, Hong Kong’s metro operator, which also runs a number of sprawling malls built atop key transportation nodes, have offered no concessions to its retail tenants.

The city’s travel sector also fears that total tourist arrivals for the entire year will plummet by a quarter as protests and the epidemic scare people away. Even if the contagion is contained by the beginning of the summer, which forecasters says is the best-case scenario, that figure may become even worse if the city’s government fails to tackle the protracted unrest.

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