Hong Kong landlords should brace for slashed retail rents in 2025: S&P Global

Major S&P-rated landlords would see 5 to 10 per cent cuts in rent for new leases in 2025, the firm said, adding that the situation could get worse if tenants walk away in spite of the lower prices.

“After 10 consecutive months of retail sales declines since March 2024 in Hong Kong, we believe the city’s retail landscape will continue to be challenging this year,” said Wilson Ling, an associate director at S&P. “Hence, pressure on retail rents could hit hard on landlords.”

According to the Census and Statistics Department, retail sales in the city fell every month from March to December 2024. For the year, they declined 7.3 per cent from a year earlier.

Ling attributed the drop to competition from mainland Chinese e-commerce platforms, more Hongkongers spending their money across the border, weaker tourist spending and a stronger Hong Kong dollar compared with the yuan.

“The retail weakness situation in Hong Kong is exacerbated by the negative wealth effect of Hong Kong’s faltering residential property market,” he said. “This cyclical factor may not be lifted this year.”

Landlords in the city’s best malls would offer rent discounts to retain tenants and minimise the damage to their cash flow, Ling said, leading to the 5 to 10 per cent cuts in rent for new leases.