Swire Pacific Ltd, Wharf (Holdings) Ltd and Hong Kong retail landlords may collect lower rents after Chanel Inc, Gucci Group NV and other tenants saw sales plunge because a deadly virus is keeping customers away.
Malls in the city known for its shopping remain empty after the disease killed 22 people in Hong Kong and infected more than 2,400 worldwide, prompting the World Health Organization to issue a global advisory against travel to Hong Kong.
"Market sentiment is very fragile," said Simon Lo, research manager at Colliers International, a property consultant. "People would rather stay at home than go shopping, and tourists are avoiding Hong Kong."
Property consultants widened their 2003 forecast for a decline in retail rents to 15 percent from 5 percent after economists pared predictions for economic growth. Lower sales will force retailers to negotiate for lower rents when leases expire and in some cases may force shopkeepers out of business, Lo said.
Shares of Swire, which owns the Pacific Place shopping mall in central Hong Kong, have declined 8.7 percent since the first five deaths from the virus in the city were reported on March 19.
Wharf stock has slumped 18 percent, in part after the company surprised analysts by cutting its dividend in anticipation of slower sales ahead.
Swire shares declined 1.2 percent to US$32.40 at 12:15pm in Hong Kong. Wharf shares were unchanged at HK$13.85, and Hysan Development stock fell 0.9 percent to HK$5.60.
"We have to admit that there has been certain psychological impact and we are monitoring the situation," said Miranda Szeto, the corporate affairs manager at Swire Properties Ltd. "We haven't had any comments from our tenants yet. Swire will not negotiate rental unless its an expiry of lease."
No leases have expired in recent weeks, Szeto said.
Spokespeople for Wharf, Hysan, Chanel and Gucci haven't returned calls seeking comments.
The extent to which retail rents remain under pressure ``depends on how long this virus outbreak lasts,'' said Derek Cheung, an analyst at HSBC Securities Asia Ltd. "There will be an impact on the economy as the increase in mainland Chinese tourists slows."
Cafe de Coral Holdings Ltd, which runs the world's largest Chinese fast-food network, expects to pay less in rent at its Hong Kong outlets after evening sales fell by a fifth since the outbreak of the virus, the company said in an e-mail to Bloomberg.
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