A slowdown in retail sales is prompting tenants at some prime locations to seek significant reduction in rents, says Donald Cheung, the executive director of Emperor International.

A slowdown in retail sales is prompting tenants at some prime locations to seek significant reduction in rents, says Donald Cheung, the executive director of Emperor International.

Emperor International is ready to cut upto 50% rents in shopping districts to retain tenants.

Emperor International Holdings Ltd (00163.HK), big landlord in Hong Kong focused on premium retail shop in popular shopping districts like Causeway Bay and Tsim Sha Tsui, is bracing for significant cut in rents at some prime properties when the tenancy agreements come up for renewal.

Rental rates for shops leased three years ago may have to be adjusted downward by 30 to 40%, while contracts signed two years ago may need to come down by 50%. Some transactions may even see the rents halved.

Emperor may offer more attractive terms to retain existing tenants or attract new tenants when other leases gradually mature.

Amid slowing retail sales, Emperor International Holdings, which holds a portfolio of street-level shops, is prepared to slash rentals to retain or attract tenants.

A drugstore-tenant in one of Emperor’s Causeway Bay properties terminated its lease three months ahead of the expiry date. After cutting the rentals by 30%, Emperor was able to attract a fashion brand to rent the space, Wen Wei Po reports.

The rental rate of that shop has already dropped back to its level two years ago. As other leases gradually mature, Emperor will most likely offer more attractive terms to retain existing tenants or draw new ones, the newspaper quoted the company’s executive director Cheung Ping-keung as saying.

Rental rates for shops leased three years ago may have to be adjusted downward by 30 to 40%, while contracts signed two years ago may need to come down by 50%, Cheung said.

But it’s not all bad news for long-term property investors like Emperor. The company is on the lookout for good acquisition opportunities to take advantage of the weak market and softer retail property prices.

Source: Eji Nsight News

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