Retailers in Hong Kong went on strike Tuesday, and about 200 shops, representing roughly 50 brands, shuttered their doors to demand lower rents.
Strikes occurred across 14 shopping centers, with some shops announcing 24-hour closures and others putting no time limit on their shutdowns. Retailers are asking landlords to waive their “base” rent, which is a minimum fixed price, and to charge only a percentage of the shop’s profits.
The strikes come amid months of ongoing anti-government protests in Hong Kong, which started in the second half of 2019. Decreased tourism and foot traffic have been a blow to the semiautonomous territory’s economy, resulting in its first recession in a decade. For the 2019 fiscal year, the Hong Kong government estimates that retail sales dropped by 11.1% to $431.2 billion, representing a 12.3% decline in volume year over year.
Amid the ongoing pro-democracy protests, Hong Kong officials say that the pneumonia-like coronavirus, which originated in the central China city of Wuhan, has worsened the financial picture for the region. While January 2020 retail sales have not yet been reported, they are expected to slide by 30%, which would be the sharpest decline on record. At the same time, tourism in Hong Kong has dramatically dropped. In the first half of 2019, there were about 200,000 travelers a day in the city, but in January 2020, daily arrivals averaged about 100,000. For February so far, arrivals have tumbled to less than 3,000 daily.
The Hong Kong Retail Management Association (HKRMA) has been asking landlords for several months to slash rents, but it said earlier this month in a press release, translated from Mandarin, that members are struggling more now due to coronavirus.
“HKRMA members generally expect to see declines of 40% to 60% from February to March, with small businesses [taking] the largest hits. In the hardest hit areas, chain stores may not be immune to this major difficulty. If the retail industry fails to get prompt and timely support, there will be a large wave of closures, and Hong Kong’s economy will suffer a further blow,” the statement reads. “The only thing that can help the retail industry is a reduction in rent costs.”
Prior to Tuesday’s protests, several major Hong Kong landlords had already agreed to rental concessions to help their tenants. Sun Hung Kai Properties, the city’s largest property developer, announced last week that it would reduce rents in the range of 30% to 50% for most of its tenants. Sun Hung Kai, owner of several major malls, said it made the decision in hopes of stabilizing the economy and preventing job cuts. Metro station mall operator MTR Corporation is also offering lower rents for smaller brands, while Link Real Estate Investment Trust said it has set up a fund, worth about $10.3 million, that includes several rent-relief initiatives, including the option to pay in installments as well as waiving late payments and service charges.