Hong Kong landlords downbeat on mall income, office rentals

HONG KONG (Reuters) - Two big Hong Kong landlords gave a downbeat outlook on Thursday for commercial property in the Asian financial hub, saying they expect the pandemic and local factors to continue to weigh on consumer spending and business for the rest of the year.

"Hong Kong is hit by three headwinds, which is the epidemic, violent protests last year, and a 'full-blown war' between China and the U.S. This is bad for businesses," Ronnie Chan, chairman of Hang Lung Properties 0101.HK, said at an earnings conference.

The developer reported that underlying net profit fell 11% to HK$2 billion ($258 million) in the first six months of 2020.

The company, which also owns shopping malls and office towers in mainland China, was much more confident about the market across the border, saying it expected a full recovery from its properties there by the end of the third quarter.

Chan said the luxury market in the mainland was little affected by the pandemic and consumers were spending more at home as travel restrictions curbed travelling overseas.

“The mainland China market is very encouraging. The big international brands are expanding very aggressively. In the coming three years, there are 70 leases signed with our malls,” he said.

In Hong Kong, another major property company Wharf Real Estate Investment Company (REIC) 1997.HK said that while the number of new tenants had dropped a lot, some luxury brands including Hermès and Christian Louboutin had opened shops in its malls.

However, it said the retail market still faced challenges and uncertainties in the second half.

The company reported a 26% drop in underlying net profit for the first six months to HK$3.8 billion, with retail income dropping 27%.

Hong Kong’s retail sales plunged 24.8% in June from a year earlier, falling for the 17th consecutive month, data showed on Thursday.

Wharf also said that office rents were under pressure as vacancies rose.

Reporting by Clare Jim; Editing by Susan Fenton