Hong Kong landlords offer significant discounts to attract tenants amid ongoing retail challenges, reduced tourist spending
Hong Kong’s retail landlords are extending more rental discounts to their tenants, property agents said, amid a tough operating environment.
Japanese supermarket chain Don Don Donki will be keeping its 17,332 sq ft of space across two floors at 100 Queen’s Road Central for HK$900,000 (US$115,456) a month, a 25 per cent reduction from the HK$1.2 million that the company paid for the property in 2020, agents said on Wednesday.
Meanwhile, a space spanning 8,150 sq ft in the basement of the LHT Tower on Queen’s Road Central was snapped up by a gym operator, which signed a lease in March for HK$400,000 a month. Agents said the previous tenant, mattress retailer Beyond Sleep, paid 20 per cent more at HK$500,000 per month.
In Kowloon’s Mong Kok, a 3,600 sq ft space at 48-50 Sai Yeung Choi Street South was leased by a sporting goods retailer for HK$400,000 a month in April, down 20 per cent from the HK$500,000 that British beauty retailer Lush was paying previously, the agents said.
The rental discounts come amid a sluggish retail environment in the city.
Retail sales in Hong Kong fell 3.5 per cent in March, marking the 13th straight month declines, according to the latest official data. It was, however, less severe than the 13 per cent plunge that was recorded in February.
“Landlords and tenants should work as business partners to tackle challenges,” an agent said.
Shop rents are likely to see “some minor adjustments”, but major cuts are not expected, the agent said.
“It is the current economic situation and consumption behaviour that deter retailers from opening new stores or expanding, [rather than] the rents,” the agent added.
Hong Kong’s retail slump has been attributed to decreasing tourist spending in the city and local residents’ preference to buy goods and services in Shenzhen at cheaper prices.
Between 2019 and 2023, rents in the city’s four core shopping locations – Causeway Bay, Tsim Sha Tsui, Central and Mong Kok – fell between 29 per cent and 47 per cent, according to a property agency. Last year, these rents improved by 3.2 per cent to 6.7 per cent.
This year, the new prime retail property supply will add about 700,000 sq ft to the existing stock, following an increase of 1.2 million sq ft in 2024, according to another property agency.
Causeway Bay’s Russell Street, once the world’s priciest retail strip that commanded as much as US$2,671 per square foot in annual rent on average at the peak of the market in 2018, has seen rents fall in recent months.
The owner of local pharmacy Yu Shing was expected to pay about HK$1 million a month for the premises at 22-24 Russell Street, far lower than the HK$7.5 million a month that Italian luxury lingerie brand La Perla paid in 2015.
