Restaurant closures threaten HK retailers

HONG KONG: Hong Kong's retail property market may be hit by the possible closure of Japanese restaurants as a result of concerns over Japanese food safety, industry observers have warned.

There are about 14,800 restaurants in the city, according to Simon Wong Ka-wo, president of the Hong Kong Federation of Restaurants and Related Trades, and some 13.5%, or 4,000, are Japanese.

"Turnovers of Japanese restaurants dropped 20% to 30% on average after the radiation leak happened at Japan's Fukushima nuclear plant. High-end Japanese restaurants suffered more, losing 70% to 80% of their businesses," said Wong.

The sharp decline in custom came despite restaurants taking part in a newspaper advertising campaign last month to disclose that less than 40% of their ingredients came from Japan.

"The concern over Japanese food safety will continue as the media keeps reporting the radiation leak issue in Japan. It will continue unless the radiation leak is under control," Wong added.

Some Japanese restaurants had already begun asking landlords to cut their rents, Wong said. "If some of the restaurants have lost 70% to 80% of their businesses, how can they afford to continue paying their rents and their staff?

"It is to be expected that landlords are now worrying that many Japanese restaurants will close."

However, Wong said he did not expect many Japanese restaurants to close in the short term.

"It costs at least HK$2 million (RM777,287.50) to open a small Japanese restaurant with simple decorations. That is not a small amount. I think most of the restaurants will struggle for a while or try to change their business strategies," he said.

Schubert Chong, general manager at Senshuraku Japanese Dining, said his Causeway Bay restaurant's turnover had been affected by the radiation issue, even though he provided hot dishes other than sushi.

"The fall is expected. But I think the impact is short term only. I have no plan to close my restaurant," he said.

Before the earthquake, property consultancy Colliers International had forecast Hong Kong retail rents would rise by 26% in 2011.

Now Simon Lo Wing-fai, Colliers' director of research and advisory, said he expected rents would rise by 19% in total this year.

"We may see more shops being vacated in the second half or towards the year-end," Lo added, cautioning that demand for Hong Kong retail property was greatly reliant on the mainland and tourist-related outlets such as those selling watches and cosmetics.

"It is very unhealthy. If demand from the food and beverage industry shrinks, the strong growth in retail rents that we witnessed over the last few years may come to an end."

Helen Mak Hoi-lun, director of retail services at the firm, said while the full impact of the disaster in Japan had not yet been fully manifested in the Hong Kong retail market, early signs had already been felt and more were forthcoming.

"For example, there are now empty tables at many popular Japanese eateries in the city, which in the past was almost unheard of," she said.

Early signs were that sentiment might suffer and adversely affect retail sales, she added, leading to reductions in demand for retail spaces and a tapering-off of Hong Kong's rental growth in the sector.

However, Jeannette Chan Wing-wai, Jones Lang LaSalle's head of retail for Hong Kong and southern China, believes the issue will not negatively impact the retail market.

"Hong Kong people love Japanese food. I think the crisis may affect the business of Japanese restaurants in the short term only. Even in a worse-case scenario if many Japanese restaurants did close I don't think this will dampen the retail market," she said. — SCMP