With the resumption of normalcy and an increase in the number of tourists, business should be booming. However, under the impact of prices and rents, the business in residential districts has been declining instead of rising. Some business tenants hope that landlords are willing to reduce rents, but some trade associations said that only 10% of landlords are willing to reduce rents, resulting in a wave of reshuffling of business.
Some food and beverage traders in Areia Preta district said that the rent of their shops is at 70-80 per cent of the pre-pandemic level, but various macro data shows that the Macau economy has only recovered to 60-70 per cent of the pre-pandemic level. On the other hand, although the exchange rate of Renminbi has weakened and the source of goods is mostly from the Mainland, traders have to go through a number of stages to purchase goods. If one of the links, such as logistics, increases in price, it will be difficult to reduce food prices. The business environment is challenging, and traders describe the price increases as “accelerating the closing down of their businesses”.
In addition, due to the convenience of border crossing, residents are happy to go north for spending. Shop owners said, “It takes about 10 to 20 minutes to cross the border, but the price of a meal in Macao is the same as that of two meals in the Mainland.”
Switching to online shop upon expiry of lease
Under the various operating pressures, some of them have tried to negotiate with the landlords for a rent reduction, but the landlords have been evasive and ” there is no further response”. The tenants hope that the rent of shops in the residential area will drop by 10% to 15% in the second half of the year, as mentioned by the property sector, and then they will swap their shops for another one.
Retailers at Three Lamps district said that the area is positioned as a Southeast Asian gourmet area and tourists come here in droves. Seeing the increase in tourists, the landlord thought that the business of his shop would definitely increase and asked for a 10% rent increase a few days ago. However, with the change in consumption pattern of tourists after the pandemic, coupled with the convenience of online shopping, both residents and tourists are not spending much. The pressure of operation is no less than before the pandemic, so they intend to switch to online operation after the end of the tenancy agreement.
Ieong Weng Seng, President of the Macau Food & Beverage Industry Development Association, said that it is not easy for catering operators to move to another shop, the cost of redecoration is large, and if it comes to the point of relocation, it is obvious that there is “no other way out”, and the increase in rent is larger than the cost of relocating and remodelling, so in order to survive the only option is to “change shop”. Some tenants also chose to “close one shop and extend the business hours of another”, hoping to increase their income to offset the increase in rent. He estimated that only 10% of landlords would be willing to reduce rents, and said that the tide of shop replacement is rising, “shops on the street change quickly”, and the fittest survives.
This article is in collaboration with Macau Daily News
