New World to cut some shop rents amid retail sector slowdown

September 04, 2015 10:23
Cuts in store rents will be on a case-by-case basis, says New World Development's Henry Cheng. Photo: HKEJ

New World Development Co. (00017.HK) is slashing rents for some tenants at its shopping malls, a move aimed at helping retailers that are facing difficulties due to a sales slowdown.

The reduction in rents will be on a case-by-case basis, depending on the business situation of the individual stores, chairman Henry Cheng Kar-shun said, according to the Hong Kong Economic Journal.

New World's rental income, including those from offices and shopping malls, edged up 3 percent to HK$720 million in the six months ended December, which corresponds to the company's fiscal first-half.

Alfred Lau, an analyst at BOCOM International Securities, said the impact of the rental cut will not be significant given that shopping mall leasing accounts for just 5 percent of the developer's total revenue.

Lau, nonetheless, warned of material impact if rents are cut by 20 percent or more, which could lead to stronger depreciation levels in the properties' value.

Knight Frank Hong Kong head of appraisal and consultancy Thomas Lam earlier indicated that overall rents for shops in Hong Kong could slide 10 to 15 percent by the end of this year.

Wharf Holdings (00004.HK) senior executive Doreen Lee Yuk Fong, meanwhile, said her company is facing no pressure to undertake rental cuts.

The group has not received any calls from tenants although the retail sector generally has seen a slowdown, she said.

Among other commercial landlords, Hysan Development said there has been no demand for rental cuts from large international brands.

[Chinese version中文版]

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Hong Kong Economic Journal