Retail landlords becoming more flexible in rental terms

They fear having empty shops for extended periods.

Hong Kong’s retail market continued to recover and recorded positive growth for 4 months in a row, with retail sales value rising another 0.1% year on year in June 2017, according to Knight Frank. 

Half of the 20 retail categories registered positive growth. According to the Hong Kong Retail Management Association, most of its member companies are looking forward to a steady growth for the remainder of 2017.

Visitor arrivals during the first half of the year gained 2.4% year on year, led by a 2.3% growth in visitors from the Chinese Mainland.

Here's more from Knight Frank:

Overnight and same-day visitor arrivals rose by 5.0% and 0.2% respectively, with those from the Mainland up 5.4% and 0.3% respectively. Rental levels for prime street retail stores in different districts have mostly undergone adjustments.

Recognising that additional capital cost is required to recruit new tenants and at the same time to avoid the risk of having empty shops for an extended period, landlords are now willing to make more adjustments during negotiations.

For example, a restaurant renewal in Soho was recently completed at a discount of 30% to the previous lease. Following the stabilisation in overall retail sales, we expect to see more realignments for retail stores in the comings days.

We believe the retail rental market is on track to bottom out in the second half of 2017.