Landlords of retail shops in prime shopping districts, as well as the border areas, are sizzling with worries in the upcoming summer sales season. Billy H.C. Kwok / Bloomberg

Shenzhen's decision to limit the number of visits by its residents to Hong Kong to one per week is likely to hit landlords of retail shops near the border in their pockets, as they would be forced to come up with drastically reduced rents.

Property experts have now revised their assessments upwards, saying shop rents in the border areas could fall by up to 15 percent.

Commercial real estate firm DTZ said on Tuesday its original forecast of a 5 to 10-percent increase in retail-shop rentals in the Northwest New Territories was way off.

"Those who have deep business links with parallel traders will bear the brunt of it, such as pharmacies," said Kevin Lam, DTZ's head of business space in Hong Kong.

He said there used to be fierce competition for decent street shop space in these areas in the second half last year, pushing up rents, but now, they're on the way down.

At the same time, landlords in the city's prime shopping districts are not going to have a jolly good time either. Retail-shop rentals in these areas will be dented by the shifting spending pattern of mainland tourists as well as the growing lure of tourist destinations in the region due to their currency depreciation. A 10 to 15-percent slide in rents is expected this year.

The sales value of jewelry and luxury watches slipped by almost 16 percent year-on-year in the first two months of this year, while that of fashion items and accessories fell by around 3 percent.

Jewelry and watch chain stores used to take up prime shopfronts, paying astronomical rents. But, falls of more than 40 percent in rentals are now obvious in their lease renewals.

Among new leases, a shop on the ground floor of Tak Shing House, 20 Des Voeux Road Central, was rented out in the first quarter of this year to a cosmetics retailer for HK$400,000 a month. Its previous tenant, a fashion retailer, rented the shop three years ago for HK$700,000 monthly - a difference of nearly 43 percent.

In Causeway Bay, a shoes retailer rented a shop on the ground floor of 510 Lockhart Road for HK$450,000 a month earlier this year, compared with HK$500,000 previously forked out by a pharmacy store.

"There have been cases of new rentals being close to previous rental levels, but it's now extremely rare to see new rentals surpassing previous rates," Lam said. "The exception may be in second-tier areas where few tourists congregate."

He said more shop vacancies are likely in second- or third-tier districts, where a more than 20-percent drop in rents would be likely.

However, at sites that accommodate a basic consumption or broader consumer base, such as restaurants and leisure retailers, landlords might be more confident in negotiating with tenants.

In the Grade-A office market, net absorption in all districts returned to positive territory for the first time since the first quarter of 2013, as a result of improved demand for office space from different industries. Office rentals in all districts have also gone up for the first time in nearly two years.

"We've seen some bigger leasing deals at newer buildings in Kowloon East, mostly led by government departments and shipping companies," said Alva To Yu-hung, DTZ's managing director. "Central and Admiralty continue to draw smaller leasing deals involving financial companies and related trades."

agnes@chinadailyhk.com

(HK Edition 04/15/2015 page8)