Retail leasing market thrives amid satellite casino closures in ZAPE

Realtor Centaline summarized yesterday the first half of the property market in Macau, highlighting the improvement in the retail leasing market while also noting potential lease terminations in the ZAPE area due to the closure of satellite casinos.

“There is a chance that many leases in the ZAPE area could end, but this won’t happen right away,” said Jack Lei, principal regional sales director at Cetaline Property, presenting his views on the area’s leasing situation yesterday.

“We do not expect to see any significant lease terminations by December 31,” he said.

According to him, considering the area’s long history of commercial activity, it will not change abruptly. “While some current tenants may decide to leave, new tenants are likely to move in to take their place,” he told the media on the sidelines of a press conference.

Lei further noted that shop spaces in the ZAPE area vary widely in size, “ranging from small shops of 200 square feet to large shops of several thousand square feet.”

He expects that after the wave of lease terminations, rents and prices will decline, with the extent of the decline depending on location and size, ranging from approximately 30% to 50%. Among these, larger shop spaces that can attract other industries are expected to see relatively smaller rent reductions.

According to Lei, some businesses from residential areas have moved to the ZAPE area over the past two years. He believes that the range of businesses there will gradually diversify to include pawnshops, jewelry stores, and retail fashion.

However, he was quick to add that the area currently has about 1,000 registered properties, which poses challenges for new industries looking to establish themselves, requiring the market time to adjust to this influx.

The ZAPE area has been impacted by the closure of the satellite casinos, resulting in a vacancy rate of 15.4% in the first six months of this year. This trend is expected to persist in the second half of the year. In contrast, data from Centaline indicates that vacancy rates across all regions of Macau have declined, with the rental market showing particularly strong activity, especially in tourist areas, where 18 transactions have been recorded for rents exceeding MOP200,000.

According to the realtor, rents for some large properties in tourist areas can reach MOP400,000 to MOP500,000, with many shops being quickly acquired to boost profits.

Meanwhile, in residential areas, despite numerous closures, there have been a significant number of transactions this year.

“Rents have declined, prompting many landlords to lower prices or extend rent-free periods, leading to more active start-up rentals compared to last year and signaling an improvement in the market,” Lei remarked.

In other markets, such as the office market and factory buildings, Centaline noted that both sectors experienced relatively weak transaction activity, with a significant decline in prices in the factory market.