Hong Kong's property agencies seek rent relief as 'no one dares to come out' to sales offices amid coronavirus outbreak

By Sandy Lisandy.li@scmp.com / https://www.scmp.com/business/article/3049638/hong-kongs-property-agencies-seek-rent-relief-no-one-dares-come-out-sales?utm_medium=partner&utm_campaign=contentexchange&utm_source=EdgeProp | February 11, 2020 6:16 PM SGT
Hong Kong's largest property agencies with almost 900 sales offices in the city are asking for discounts on new leases as they brace for further slide in sales after the industry's worst year since 2016.
Centaline Property Agency is prepared to shut some of its 423 branches if it cannot extract 20 per cent or more rent relief, a top executive said. Qfang would negotiate for lower rents when leases on some of its 20 branches come up for renewal, Chief Executive Vincent Chan said.
The demands show more businesses are battening down for hardship amid the coronavirus outbreak, after weathering months of social unrest last year. Hong Kong retailers and restaurant operators have started to cut costs this month as the outbreak develops into the biggest health crisis since 2003 and strains an economy already in recession.
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"We have leases coming up for renewal nearly every day and in current market conditions, it will not have much impact to lose some branches," said Louis Chan, vice-chairman for Asia-Pacific at Centaline. "We are in a situation where no one dares to come out at all" to view properties, he added.
The virus, which originated from Wuhan in central Hubei province, has killed at least 800 people and infected more than 37,000, mostly in mainland China. Panic-stricken Hongkongers have since cleared out supermarket shelves for daily essentials.
Property transactions in Hong Kong fell to a 13-month low of 3,776 in January, the Land Registry said. They dropped 5.5 per cent last year to 74,904, the least since 2016. Commercial and industrial property transactions tumbled to the lowest on record in 2019, according to Ricacorp Properties.
With more than 10 property agents competing for one deal last month, the ratio bodes ill for the industry, according to Sammy Po, chief executive of Midland Realty. About 30 per cent of the industry practitioners could lose their jobs if conditions worsen, he added.
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"Most landlords are willing to cut rents as it is hard to get new tenants now," he added. "The operating environment will become even tougher as property transactions are bound to fall by 30 to 40 per cent this month."
Midland Realty has managed to trim its rents by 20 per cent on average for most of its 630 sales offices in Hong Kong and mainland China, some by as much as 70 per cent, Po said.
Rentals on sales offices account for about 30 per cent of Centaline's operating costs, Chan said. The firm has no plans to cut salary or jobs for now, he added.
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The firm is going to great lengths to get a deal done as sellers opt for online listings to limit the risk of viral transmission instead of viewing appointments, he said.
"To increase sales, we are happy to take videos of their units and put them online if they request for this service," he added. "It does not matter if they are asking for HK$5,000 or HK$50,000 rent, we will do it."
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.
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