High-street shop rentals plunge 20 pct

With the city’s retail sector experiencing a downtrend this year, the shop rental level in prime locations has already experienced a decrease of at least 20 per cent year-on-year so far – an adjustment phase that is likely to continue throughout the coming months, estate agencies and the Macau Association of Retailers and Tourism Services said. The overall high street rental level of Macau, covering areas near tourist attractions São Domingos Church and St. Paul’s Ruins, has decreased 20 per cent to 30 per cent compared to 2014, according to a rough count by retailer association director Frederick Yip Wing Fat and estate agencies. “In some prime locations such as the areas of São Domingos Church and St. Paul’s Ruins, we have even seen cases where the rental drop is 30 per cent or more,” associate director at Jones Lang LaSalle (Macau) Ltd. Oliver Tong told us, “Shop space transactions have also been largely silent: less than 10 transactions were completed in these areas in the second half of this year.” An even more radical drop in rent was observed in the ZAPE district on the Macau Peninsula, also a prime location near several casinos with streets lined with pawnshops and restaurants, according to Ricacorp (Macau) Properties Ltd. “The rent of some shops located near the casinos in the ZAPE district has gone down by some 40 per cent so far this year,” according to Ricacorp Macau’s chief associate director Franky Fong, “For instance, the owners used to lease shops in that area at about HK$500 (US$64.4) per square foot, and now it’s dropped to HK$300 or less per square foot.” The vacancy rate of shops in the ZAPE district is also high at around 13 per cent, Mr. Fong added. Macau’s retail sales, which saw much milder growth last year, saw a decline for the first three quarters of this year, data from Statistics and Census Service reveals. For the January to September period, the value of retail sales here is down 10.4 per cent year-on-year to MOP45.3 billion, where a double-digit decline is evident in the value of retail sales in watches, jewellery and leather goods, according to the census service. Speaking to media at an event last week, Mr. Frederick Yip espoused a pessimistic outlook on the retail sector for the coming six months with the expectation that overall retail sales value is likely to decline further. Macau Government Tourist Office head Maria Helena de Senna Fernandes has also noted before that the city may record a slight drop in visitor arrivals for this year, when compared to the 31.5 million recorded in 2014. Downward pressure High street rentals here may see further room to drop next year given the weak retail trend, more sluggish growth in visitor arrivals and more supply of shop space available following the completion of more Cotai casino-resorts, Mr. Tong of Jones Lang LaSalle Macau reckons. “For the luxury or super luxury brands, for sure their very weakened sales have driven them to get much more cautious in their expansion plan here,” he said. “But some other international brands engaged in fast fashion, cosmetics and sports have still shown keen interest in exploring the Macau market to see if they can branch out or set up their first shop in the prime locations.” “These brands are considering the factors of whether the current shop rent level has further room to drop and whether the owners here, many of whom are individual landlords in the prime locations, can accept the bargain with a more flexible dealing structure when charging rent,” Mr. Tong added. The Jones Lang LaSalle agent estimated that the shop rent of prime locations could drop a further 10 per cent to 20 per cent compared to current levels. Mr. Fong of Ricacorp Macau, on the other hand, estimated that the fall seen in high street shop rentals this year would begin to stabilise in the coming six months. “Now in the ZAPE district, we’ve seen more clients who are interested in moving their businesses there,” he said. “These businesses are mostly the smaller-scale retailers or restaurants from the residential neighbourhoods, and now they are looking to see if they can settle in this prime district.”