Date
18 December 2017
Hong Kong commercial landlords are facing headwind from both sides of the border. Photo: inmediahk
Hong Kong commercial landlords are facing headwind from both sides of the border. Photo: inmediahk

Why Qianhai scares HK commercial landlords

If you own retail space in Hong Kong’s prime shopping areas such as Causeway Bay, Tsim Sha Tsui or Mong Kok, you can sit back and let tenants fall over each other.

A deal, complete with rent-rise provisions, restrictions and mandatory renovations, is a sure thing.

With an average rent of US$3,017 per square foot, Causeway Bay overtook New York’s Fifth Avenue as the world’s most expensive shopping precinct last year

Now, however, Hong Kong’s commercial landlords are facing headwind from a possible cut in visitors from mainland China who have been largely responsible for fueling a retail boom. And a proposed shopping mall across the border that will sell products available only in Hong Kong, is an added concern.

The shopping complex will rise in Qianhai, a pilot zone near the border with Shenzhen, and will be up and running by the end of the year.

That means less incentive for mainlanders to come to Hong Kong for things they could only buy here ranging from some baby formula brands and selected luxury and electronic products to cosmetics.

All these things will be available in Qianhai.

It’s said that a large chunk of plot near the Qianhai Bay subway station has been rezoned for the project.

As one of China’s bonded ports, Qianhai offers discounted tariff and simplified clearance procedures to companies that do business there. Also, Hong Kong retailers are welcome to open shops or counters in the mall.

A team from Qianhai will be stationed in Admiralty where local companies, including retailers, can register to set up subsidiaries and branches in the special zone without having to cross the border.

Chinese customs regulations prohibit overseas entities, including Hong Kong firms, from selling goods in a bonded port but Qianhai authorities have been in talks with government officials to find a way around them, according to China Securities Journal.

Considering the lower rent, it’s hoped that goods sold in Qianhai are cheaper than those in Hong Kong.

Retailers, whose margins have been cut thin by soaring rent in Hong Kong, will be happy to embrace the Qianhai opportunity.

How much the Qianhai mall will affect Hong Kong’s commercial property market remains to be seen.

But if other cities in the mainland launch similar projects in their respective bonded ports, the inflow of mainlanders to Hong Kong will begin to slow to a trickle.

A duty-free mall in Sanya in Hainan province has been attracting a growing number of mainland shoppers and holidaymakers.

– Contact the writer at [email protected]

RA

Scenes likes this can be a nightmare for landlords. A cut in mainland arrivals could have a drastic impact on retail traffic. Photo: inmediahk


EJ Insight writer

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