Some shops were not rented despite landlords’ willingness to lower the rent by half, Patrick Chan, vice director of Shop Sales and Lease at Savills said.
The resumption of travel to Macau for mainland tourists has not boosted tourist arrivals in the city, making it tight for retail operations in tourist districts. Chan revealed that landlords are willing to negotiate on rent with their tenants every quarter, in the hopes of retaining the contract. The vice director said it was because it can be hard for the landlords to secure a new contract if the existing tenants decide to leave.
He added that although some landlords agreed to lower rent to half of pre-Covid levels, tenants were still difficult to find. He explained that companies are more vigilant in terms of the future.
For example, he said, if a shop’s rental is HKD300,000 per month, the tenant needs to at least generate HKD600,000 of revenue per month, not taking into account storage and salary and wages costs. This has made it difficult for most business operators.
The number of residential and commercial property sales plunged in the first half of the year in 2020. The situation was similar to 2014, when the property market was reeling from a sharp contraction in gross gaming revenue.
Retailers then pinned hopes on an influx of Chinese visitors to Macau in the middle of January, most of whom were expected to come for Lunar New Year shopping activities, to push receipts to new heights.
However, the holiday visitors fell short of the government’s expectation as visitor arrivals to Macau during the entire week only totaled 90,615, down 65.3% from the prior-year period.
As previously reported by the Times, local property agents are seeing small businesses and neighborhood shops closing, stressing that 2021 seems to portend even darker days than 2020.
There were agents who claimed that since the year started, requests for contract termination have been growing.
Most of the requests come from small shop tenants that are closing their shops and want to terminate their rental contracts.
Earlier this year, JLL remarked that its outlook for the city’s recovery is positive, despite estimating that about half a year will be needed to return to full throttle after the pandemic is under control.
The emergence of the Covid-19 vaccinations was seen as shot in the arm to not only contain the spread of the virus, but also to save the real estate market. AL/LV
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