Shop owners in SoHo, one of Hong Kong's most bustling nightlife districts, are willing to offer steep discounts on their asking prices as an increasing number of restaurants and bars remain vacant in the current economic downturn, market observers say.
According to Midland IC&I, only 168 deals for shops were recorded in the first quarter in Central, which includes SoHo. The commercial property agency said that it was the worst ever quarter since it started tracking transactions in 1996. Nearly a quarter of the 138 shops in Staunton Street and Elgin Street, known for restaurants offering a range of international cuisine from Indian to Italian, are sitting empty, it said.
"Unfortunately, it is not that easy to find buyers," said Daniel Wong, chief executive of Midland IC&I, adding that potential buyers were looking for at least a 30 per cent discount. He said it only was reasonable because it is difficult to lease the shops out currently and the rents buyers can ask have fallen. "In some cases, the new buyer may have to wait for a while to find a new tenant if the shop is not sold with a lease."
First hit by Hong Kong's anti-government protests, then the Covid-19 outbreak which led to the government's social distancing policy, requiring restaurants to only open at half their capacity, many bar and pub owners in SoHo had no choice but to shut shop.
A 1,000 square feet space in Elgin Street, which housed a restaurant that has since closed, was recently sold for HK$34 million (US$4.4 million), about half the asking price from a year ago before the city's retail businesses were hit by the months-long social unrest starting in the middle of last year followed by the ongoing coronavirus outbreak.
Another 420 sq ft shop on Peel Street, where several bars are clustered, went for HK$15 million earlier this month, with the seller making a loss of HK$9 million on the original investment of HK$24 million in 2015.
Rents for food and drinks outlets in Central have fallen by 15 per cent in the first quarter from the fourth quarter of last year, according to Cushman & Wakefield. The property consultant expects rents in the first half to drop up by to 30 per cent.
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