Lohas Park, Hong Kong's single largest residential enclave, will get its own shopping centre after more than a decade of waiting, with 13 stores opening on Sunday as the city grapples with its worst recession on record.
The stores will take up 70,000 sq ft of retail space or about 15 per cent of the 480,000 sq ft of available space in the three-storey mall known as The Lohas in New Territories, according to owner MTR Corporation, which is also the city's rail operator.
This weekend's initial launch is being rushed four months ahead of its schedule to meet demand from work-from-home residents and those living in the vicinity, even though a third wave of coronavirus pandemic has continued to depress retail sales and tourist arrivals.
"We want to provide services to local residents as soon as possible, particularly when many are working from home amid the pandemic," said David Tang, property director at MTR. "If we can open some stores, this can help them avoid going to another district for meals and shopping."
Retail sales have slumped for 17 straight months, with supermarkets the only bright spot among all types of businesses, according to the statistics bureau. Sales shrank 33 per cent in value in the first half this year from a year earlier. Tourists from mainland China, the lifeblood of the industry, have since been reduced to a trickle.
Total retail sales could drop by about 25 per cent on a full-year basis from last year's HK$431 billion (US$55.61 billion), according to Martin Wong, associate director of research and consultancy in Greater China at Knight Frank.
The opening, still the biggest since the launch of K11 Musea in Tsim Sha Tsui in Kowloon a year ago, is a relief for Lohas Park since the first residents obtained keys to their flats in 2009. Now into its final development phase, the enclave will be home to 63,000 people when fully completed in 2025.
About 40 per cent of Lohas Park residents, or about 10,000 households, have moved in, Tang said. Together with The Beaumont, another residential estate nearby, there is a lot of demand from shopping in the location, he added.
The partial opening is an unusual practice given the economic backdrop, Tang said. The shopping centre is still slated for full opening by Christmas, by which time a cinema and an ice-skating rink will be among the attractions, he added.
MTR has so far managed to lease out some 70 per cent of the retail space after an initial struggle to find tenants at the height of the pandemic. Months of social unrest in 2019 had also cast a pall in Hong Kong's retail industry as tourists shunned the city.
At The Lohas, as the mall is called, a supermarket called Fresh covering 20,000 sq ft of space will open for business on Sunday. It will be joined by four restaurants, a pharmacy, a dental clinic and a property agency, among others.
"For tenants to rent retail shops now, it is understandable that they want to wait and see how the situation would go," Tang said. "I believe all shopping centres across Hong Kong would face the same situation, no matter for new lettings or lease renewals."
MTR, which is majority-controlled by the Hong Kong government, has cut rents for some of its tenants since February to help businesses weather the current economic crisis. Concessions for other shops would be reviewed individually.
The group incurred a HK$334 million net loss in the six months ended June 30, compared with a profit of HK$5.5 billion a year earlier, according to its interim results published on August 11.
Knight Frank's Wong expects the vacancy rate in core retail areas to continue to surge and prime street rents to continue to test new lows for the rest of the year as the pandemic persists.
"The speed of controlling the third wave of the epidemic is not satisfactory," said Stanley Poon, managing director at Centaline Commercial. "It has been out there for more than a month. Economic recovery is still not in sight. Hardest hit are the catering and retail industries."
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