Short term lease boom
In this article (5)
Growing ranks of Hong Kong landlords are renting out retail space for as little as 90 days to ride out the downturn.
The number of short term Hong Kong leases has risen sharply since November, according to property agent Midland IC&I.
The trend began in the lead up to the Christmas-New Year retail peak when landlords opted to have tenants for a short term in preference to forgoing any rent at all.
Now, in the lead-up to Lunar New Year, the trend has continued as retailers look for opportunities to optimise sales in a peak spending season – and landlords are happy to achieve a return on otherwise empty space.
The most likely retailers to sign up are jewellers – the hardest hit by the changing demographic of Mainland Chinese tourists – and apparel brands creating pop up stores.
Retailers are securing space for as little as three months while landlords are achieving about 70 per cent of the normal rent they would have received prior to the retail downturn kicking in.
Midland IC&I CEO Wong Hon-shing told the Hong Kong Economic Journal retail tenants liked the flexibility of being about to exit the space with as little as seven days’ notice.
The HKEJ said brands to take advantage of the new environment include Bossini, Tse Sui Luen Jewellery and Colombia. It reported TSL was paying about $350,000 a month for space in a three month lease set to end in February after the Lunar New Year.
Questions & Answers
Q.What kind of businesses are most frequently using these short-term retail leases?
What kind of businesses are most frequently using these short-term retail leases?
Jewellers are among the most likely retailers to sign up, as they have been heavily affected by changes in Mainland Chinese tourist demographics. Apparel brands are also creating pop-up stores using this short-term leasing model.
Q.When did this increase in short-term leases first become noticeable in Hong Kong?
When did this increase in short-term leases first become noticeable in Hong Kong?
The number of short-term leases in Hong Kong has risen sharply since November. The trend initially began in the period leading up to the Christmas-New Year retail peak season.
Q.How much rent are landlords typically achieving with these short-term agreements compared to previous rates?
How much rent are landlords typically achieving with these short-term agreements compared to previous rates?
Landlords are currently achieving about 70 per cent of the normal rent they would have received before the retail downturn started. Retailers are securing space for as little as three months.
Q.What is the minimum notice period tenants might have to exit a short-term lease agreement?
What is the minimum notice period tenants might have to exit a short-term lease agreement?
Retail tenants like the flexibility of being able to exit the leased space with as little as seven days' notice. This offers businesses significant adaptability in uncertain market conditions.
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