The MTR Corporation is struggling to find tenants to fill up The Lohas shopping centre in Tseung Kwan O because retailers are hesitant to commit to long-term leases amid a slump in consumer sentiment caused by months of social unrest and coronavirus.
The Lohas, which spans three-stories with a 480,000 sq ft of gross retail space, will open for business in phases from the second half this year, according to property director David Tang Chi-fai. Slightly more than half of the 150 store spaces have been taken up, he disclosed on Monday.
"Many executives in the retail and catering sectors are quite conservative when it comes to opening up new shops [amid the coronavirus situation], which has delayed our plans for tenant sign-ups" Tang said. "The progress is not in line with our targets."
Hong Kong's retail industry has endured a prolonged slide since anti-government protests broke out in June last year, starving the city of its lifeblood, the mainland Chinese tourists and their purchasing power. The onset of Covid-19 epidemic has now compounded the dire outlook, with retail sales sliding by record pace during the busiest festive periods on the calendar.
Retail sales plunged 24.1 per cent in January from a year earlier, while mainland tourist arrivals fell to only 3,000 on average in February, compared with 200,000 last year, the government has said. Several retail chains have scaled back their operations in Hong Kong as sales slumped, including cosmetics group Sa Sa International, jewellery firm Chow Tai Fook and furniture store operator Pricerite Group.
Lohas Park is Hong Kong's largest residential enclave, with an estimated 58,000 residents in 21,500 flats, when the project is completed in 2025. Residents living in about 10,000 housing units in Lohas Park have been waiting over a decade for a local shopping centre to meet daily necessities such as groceries and restaurants.
An artist impression of MTR Corporation's The Lohas mall in Tseug Kwan O. Photo: Handout alt=An artist impression of MTR Corporation's The Lohas mall in Tseug Kwan O. Photo: Handout
The government-controlled company has had to cut rents for all small and medium-enterprise tenants at its railway stations and 13 other shopping malls in February and March to help ease their financial strain. Tang said the MTR Corporation "will definitely consider" offering more concessions to retailers if the gloom persists.
A gradual opening of The Lohas is a better choice for MTR than waiting out for a market upturn, said Dennis Cheng, senior sales director focusing on retail properties at property agency Ricacorp.
"We can expect quite a bit of foot traffic from local residents in the new mall, especially in supermarkets and restaurants," he said. "They have waited for a long time for this mall to finally open and would make their lives much more convenient."
The Lohas shopping centre is the rail operator's largest residential area retail arcade since PopCorn2 in Tseung Kwan O in 2012. Earlier this year, it bought interest in two shopping malls from New World Development for HK$3 billion, which Tang said was aimed at boosting its future recurrent income to fund railway maintenance and upgrade.
The city's sole rail operator faced a 44.8 per cent plunge in its recurrent profits in 2019, after writing off costs on the Sha Tin-Central rail link and its South Western Railway franchise in London. Last year, its revenues grew 1.1 per cent to HK$54 billion net profit dropped 25.5 per cent to HK$11.9 billion.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.
Copyright (c) 2020. South China Morning Post Publishers Ltd. All rights reserved.