Protests have hit Causeway Bay and Tsim Sha Tsui rents the hardest.

Swire Properties announced a temporary rental reduction of 10-25% for most of its tenants at Pacific Place mall, the first major shopping mall in Hong Kong to offer a rental adjustment amidst deteriorating sales and tourist arrivals. But OCBC Investment Research says that it may not be the last high-end mall to do so as mass protests and trade tensions continue.

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OCBC said that Wharf REIC might see the most pressure on rental adjustment, not only because of its high-end positioning and 30-40% of tenant sales coming from Mainland Chinese tourists, but also due to the newly opened K11 MUSEA shopping mall in Tsim Sha Tsui which imposes extra pressure to its flagship mall, Harbour City.

These cuts could kick start a rental reduction cycle across shopping malls. Those with higher tourist exposure and those whose offerings are tilted towards high-end retail, such as those in Tsim Sha Tsui and Causeway Bay, are likely to face more pressure than regional malls that have exposure to non-discretionary consumption.

Hong Kong’s retail sector were amongst the hardest-hit by the ongoing protests, recording an 11.4% YoY fall in July, according to the Census and Statistics Department. Luxury sales crashed 24.4% during the same month.

Photo courtesy of Wikimedia Commons.