Fed up with landlords? Renting like Pure Fitness, does it make sense to rent anymore?
By HK Lawyer AJ Halkes Barrister-at-Law
Just a few days ago, news emerged that a shop in Yau Ma Tei was sold, with the buyer possibly being the end user.
Even if not confirmed it raises an important question: In Hong Kong, right now if you have a long-term business goal, why would you allow yourself to be held hostage by landlords? Under the right circumstances, purchasing property could make far more sense — something I’ve advocated for quite some time.
Despite higher interest rates, this commercial property, priced at HK$28 million, isn’t as costly as it might initially seem when you consider the around 6,000 ft of space involved (upper level mainly) with dedicated street access and the strategic advantages it offers.
Many point to Pure Fitness as an example of struggles faced with rented properties, often attributing difficulties to landlords demanding exorbitant rents. However, rent isn’t always the reason for business closures in Hong Kong. If you’re truly committed to the Hong Kong market and your long-term success, it might now make sense to approach an investor or a bank and secure commercial terms for a long-term property purchase; and not rent.
Would this approach result in lower monthly costs than renting? Almost certainly not. But would it necessarily be much more expensive? Possibly not either. As with everything, it depends on your perspective and long-term strategy.
Major companies like Marks & Spencer in the UK and IKEA have built significant fortunes by owning real estate. If a retail location doesn’t perform as expected, they simply relocate their operations and lease out the property, it’s a well-established and successful formula.
To all the F&B, fitness or gym operators out there, perhaps it’s time to consider purchasing a property that works for you and in doing so, secure a future free from the challenges of dealing with landlords.
For insight into this property and the source of data in this post (and the Hong Kong retail property market) I recommend checking out content by Dr. Edwin Lee, available in both English and Cantonese.
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