Downtown commercial market in recovery - Plataforma Media

Downtown commercial market in recovery

With the relaxation of pandemic control measures and the recovery of tourism in the city, the recovery of the commercial real estate market has become increasingly clear. Sector representatives indicate that rents in the city center have recovered to values close to 60 percent of those practiced before the pandemic. However, they predict that it will take a year for the commercial leasing market to fully recover.

In the tourist center of Macau it is common to see monthly rents that reach values above one million Hong Kong dollars. However, in the last three years, the local tourism-centric economy has suffered a heavy blow, especially in extremely touristy districts such as Largo de São Domingos and the area of Ruínas de São Paulo.

To PLATFORMA, the president of the Association of Real Estate Agents of the Macau Real Estate Sector, Chris Wong Sai Fat, indicates that during the pandemic, the commercial rental market shrank severely, with several establishments forced to close or suspend their operations.

Chris Wong points out that with the decrease in the number of tourists and the income of residents, both external and internal consumption decreased simultaneously.

“In 2022, compared to 2019, rents in the Ruins of São Paulo zone fell by around 40 to 50 percent, and by around 30 percent in the Taipa Velha zone,” says the sector representative.

Incomes hit record lows

The owner of a store on Rua de São Paulo commented to Plataforma Macau that his store has been vacant for over a year. With income reaching HK$200,000 in 2017, the same store has seen its rent drop to HK$80,000 during the pandemic, yet it has remained vacant.

Kou, a real estate agent, tells PLATAFORMA that during the pandemic, however much store rents dropped, the negative economic climate and uncertainty kept potential renters away.

According to the agent, before the pandemic, a store with a monthly income of HK$300,000 could be occupied, but in 2022 even with an income of HK$30,000, no one was willing to open the purse strings.

In the traditional tourist area of Macau, you can now see shops – formerly with some of the highest rents in the city – closed with advertisements for rent everywhere.

According to Wong, the vacancy rate for stores in 2022 reached 25 percent in areas such as the tourist areas of São Paulo, ZAPE and NAPE, with the vacancy rate for stores in Taipa’s old town reaching 16.8 percent. .

Lei Cheok Kuan, President of the Federation of Industry and Commerce of Macau Center and South Districts, considers that the vacancy rate in the center reached 30 percent in 2021-2022.

“Some of the stores are not closed, they just suspended operations to regain strength.”

Market recovery

With the relaxation of pandemic prevention measures and the resurgence of tourism, the market in the historic areas of Macao and Taipa has recovered considerably.

In an interview with PLATAFORMA, the senior director of real estate agency Centaline Macau and Hengqin, Roy Ho Siu Hang, pointed out that some stores in tourist areas, which had seen a reduction in monthly rent to HK$30,000-50,000, have suddenly seen their income increase to 150,000 Hong Kong dollars.

However, it indicates that although rents have increased several times when compared to the pandemic period, the volume of store leases in the Central District has recovered to only around 60 percent of 2019 values.

Ho predicts that in three to six months, 80 to 90 percent of stores in central tourist areas will be open to the public.

Better deal, higher income

However, Chris Wong points out that several landlords have already significantly increased the rent on offer. “The requested rents are similar to those before the pandemic, but stores with still very high values have not yet been leased, and of those that have been, those in the Ruins area are still with rents around 20 percent lower than before,” says Wong.

Roy Ho cites the example of an entire commercial block in Largo de São Domingos, which was recently leased to a group of sports brands for around 2 million Hong Kong dollars, noting that the same location could reach 6 million dollars in Hong Kong at heights of economic brilliance.

“Another store in the same area that could fetch HK$300,000-400,000 in rent in better times was recently leased for around HK$150,000, only half that,” says Ho.

However, the association representative warns that, although the pandemic prevention measures have been removed and the number of visitors has increased significantly to 1.4 million in January of this year, it is still a much lower number than the 3.4 million registered in January of 2019.

Thus, Wong predicts that it should take at least a year for the market to recover to pre-pandemic levels and more than a year and a half for local residents to regain confidence and consumption capacity.

Lei Cheok Kuan points out that as most landlords have reduced rents at the request of tenants during the pandemic, increases are expected in the near future.

“Most of the stores we contacted reported that they will increase rents when the contract expires.”

However, Lei believes that the current situation still does not justify the rents practiced previously. “If we look at the data objectively, tourists are returning to Macau, but the maximum value of the number of tourists has not yet reached the average daily peak of more than 100,000 tourists, we are still with around 40,000 to 50,000 tourists a day” .

Therefore, in order to “not kill the chicken to catch the egg”, Lei believes that landlords should be “rational” and negotiate an adequate rent when they find a good tenant.

“If there is a store operating, the owner will have a steady income. It’s good for both sides.”

Este artigo está disponível em: Português

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