The prices of Hong Kong’s street-level shops could slump by as much as 20 per cent if the coronavirus outbreak persists throughout the year, with retail and catering operators most at risk, according to market observers.
Owners have cut prices by 5 to 10 per cent on average since the outbreak of the Omicron coronavirus strain, said Edwin Lee, founder and CEO of Bridgeway Prime Shop Fund Management. “If the pandemic does not fade and persists for [a few] months, the shop market will drop 5 to 10 per cent,” said Lee. “If it does not fade for the whole year, it will drop 15 to 20 per cent.”
Retail sales in 2021 rose 8.1 per cent year on year, but were still 30 per cent lower compared with 2018, before the double whammy of social unrest and coronavirus outbreak. However, the outlook does not look too bright. After the government tightened social distancing measures on January 7, sales slumped by as much as half for some retailers from a week earlier, according to the Hong Kong Retail Management Association, which expects retail sales to remain flat in the first half of the year.
Lee said that if the pandemic eases and the borders are reopened, shop prices could rise 10 to 15 per cent in residential districts and by 20 to 30 per cent in core shopping districts. Bridgeway has allocated 70 per cent of its investments to shops in residential areas and the rest in core areas, betting on a rebound.
Last month, the fund sold a 1,400 square feet shop at Chun Yin Square, Yuen Long, for HK$20.8 million, making a 16 per cent profit after holding it for only four months. A month earlier, it bought a shop in Sai Yee Street, Mong Kok, for HK$27.5 million, paying considerably less the previous owner who suffered a loss of some HK$8.5 million.
Shops in northern New Territories, such as Fanling, Yuen Long and Tuen Mun were sought after since the Norther Metropolis plan was announced, he said, adding rent prospects of smaller shops in residential districts were better than large ones measuring over 1,000 sq ft.
Despite the virtual absence of mainland tourists, Tony Lo, chief executive of Midland’s ICI Property unit, remained optimistic about the outlook for shop market, citing the removal of a double stamp duty for non-residential property in late 2020. Transactions for shops last year rose 65.7 per cent year on year to 1,829, which was also a four-year high, according to Land Registry figures. Hong Kong investors are focusing more on property amid the stock market volatility, with city’s real estate market looking to be safer and more liquid option for cash-rich buyers, Lo said.
