Although retail sales in Hong Kong rose more than 10 per cent year on year in the first five months of 2026, a wave of shop closures continues, leaving tenants and landlords with vastly different assessments of the retail leasing market.
Many tenants say that despite racking their brains for solutions, their businesses remain stagnant. They are losing money because of constant price cutting to attract customers, a situation they attribute to the broader economic climate. Many hope for rent reductions of 20 to 50 per cent to ease their woes.
Landlords, however, believe the market is recovering and are willing to offer only limited cuts, typically between 10 and 20 per cent. In some locations including certain shopping centres, they are even raising rents.
The operating environment was “poor”, said Michael Leung, chairman of the Association for Hong Kong Catering Services Management, who also owns several restaurants. “There are very few people on the street by 8pm, and the industry is plagued by cutthroat price wars. Over 500,000 people leave Hong Kong for the mainland during long holidays, dealing a severe blow to the catering industry.”
Total monthly expenditures for his five restaurants – including rent, air-conditioning charges, and management fees – amount to HK$1.6 million (US$204,000), accounting for 20 per cent of total expenses. He believes a 20 to 30 per cent rent reduction is necessary for survival.
Leung closed the Lucky Dragon Palace Restaurant – known as a “TV Stars’ canteen” – in October, ending its 45-year history.
Edward Chan, founder of Hong Kong-based appliance maker German Pool, said that online sales have dealt a severe blow to bricks-and-mortar stores. He attempted to negotiate rent reductions but had not yet reached any agreements, he added.
“Landlords generally refuse to lower rates,” he said. “They are confident that tenants won’t relocate due to the substantial investment already made in store fit-outs, and they typically only agree to a reduction if a business is on the verge of shutting down.”
The situation is even harder on smaller operations, with business owners asking for steeper rent cuts.
Hung Chan, the owner of Hung Kee Beef Brisket King, a small restaurant in Mong Kok, said that few tourists were willing to spend money recently.
“Neighbouring businesses are also struggling with sluggish sales, and many shops have closed down,” he said, adding that online advertising on social media had “proven ineffective” in the poor business climate.
Chan now spent half his revenue on rent, as consumers in the area were decreasing and his business was steadily declining, he said.
“The monthly rent is currently HK$140,000, and there are six months remaining on the lease,” he said, adding that a 50 per cent rent reduction was needed for the business to survive, although it was “unlikely to happen”.
Raymond Choi, founder of Asia Property Agency, who also owns shops in districts including Mei Foo Sun Chuen and North Point, said that landlords were typically willing to offer reductions of 10 to 20 per cent, but rarely more, because rents had already dropped by half from their 2018 peak.
“Landlords believe that if a tenant’s business is struggling, they should find ways to boost sales rather than simply demanding rent cuts,” he said. -- SOUTH CHINA MORNING POST
