Will Hong Kong retail market, like Jesus, rise from the dead?

Spring is here, but our struggling retailers have yet to notice its arrival.

Last week Li Ka-shing said the economy this year is the worst in 20 years, especially in the case of the retail market, which is facing a situation that is worse than SARS in 2003.

It’s nice to know, though, that while Cheung Kong is grumbling, rival Sun Hung Kai Properties has come up with a way to cope with the situation.

At its trendy shopping mall APM in Kwun Tong, Hong Kong’s No. 1 landlord is introducing short-term tenancy.

Six shops of between 100 square feet and 300 square feet will be coming on stream for tenancy of no more than six months, says Maureen Fung Sau-yim, general manager (leasing) of Sun Hung Kai Real Estate Agency.

Fung says the tenancy will involve a new profit-sharing system, in which 10 to 12 percent of the sales will be taken as rental.

This new deal is breaking away from the traditional three-year lease where retailers have to pay 20 percent of their sales to the landlord.

Landlords are adjusting their leasing strategies in the wake of the poor retail sentiment brought about by slowing tourist arrivals.

Swire Properties, for example, is terminating the leases of underperforming tenants such as Dan Ryan and Grappa’s (and before that, the beloved of the middle class Marks & Spencer) as part of efforts to transform Pacific Place in Admiralty.

From the tenants’ side, gold, jewelry and luxury watch shops, along with pharmacies or cosmetics outlets, are giving their spaces back to food stalls and other small operators who previously could not afford the high rent.

Kowloon Watch, for example, has just closed its store at a shopping mall near my residence, its fifth closure in the past 12 months, leaving only seven shops in operation.

The short-term tenancy seems the most logical strategy in the new business climate. Some trendy retailers, such as Bathing Ape, which used to draw long queues for its limited edition products, will be perfectly suited for this flexible scheme.

In the first three months, visitors to APM surged over 10 percent to 27 million with sales topping HK$900 million, according to Fung.

This coming Easter, the mall will be spending an advertising budget of HK$2.3 million, up 10 percent from the previous year, in anticipation of a huge wave of visitors, especially those coming from the Kai Tak Cruise Terminal.

Hopes are high that the local retail market, like Jesus Christ, can rise from the dead after its extended crucifixion.