Hong Kong retailers to see full impact of rental reductions in 2017

The drop in rents is not only for street-level stores, but also for shopping malls.

Maybank Kim Eng analysts have seen rents in Hong Kong fall in the past year based on company data. Sa Sa’s rental expenses fell 2% YoY in 1H17 (Sep end), while Chow Tai Fook’s total rental expenses declined 9% YoY in the same period.

Here's more from Maybank Kim Eng:

Given that renewal terms in general are three years and rents only started to drop significantly in Mar 2016, it appears likely that the easing rental pressure was not been fully reflected into the retailers’ P&L in 2016.

We also noticed the reported drop in rents is not only for street-level stores, but also for shopping malls. Hysan Development said it will continue to reduce rents for tenants this year amid the retail slump.

Chief financial officer Roger Hao Shu-yan said the company cut rents for some retail tenants in the second half of last year, following double-digit hikes in the first half during contract renewals.