
Link CFO Ng Kok Siong (left) stands with Nicholas Allen and George Hongchoy at the earnings conference
Hong Kong’s Link REIT survived a steep downturn the city’s retail sector in 2019, recording a 5.6 percent rise in revenue to HK$10.7 billion ($1.4 billion) for the year ending 31 March 2020. That income increase came despite the city’s high streets welcoming fewer shoppers as months of anti-government protests were followed by the COVID-19 pandemic.
In a year that Link REIT’s marked its first property acquisition outside of Greater China with an A$683 million ($471 million) Sydney purchase during December, the trust’s chairman Nicholas Allen said that the business had survived a “challenging year” by focusing on the everyday needs of local communities.
While the HKEX-listed REIT has 85 percent of its HK$193 billion in assets concentrated in its home city, with nearly all of that invested in retail properties, Link REIT’s management is predicting that income from its operations in Hong Kong will remain steady during 2020, despite challenging economic and social conditions..
Focusing on Everyday Essentials
While luxury shopping malls such as Wharf Properties’ Times Square in Causeway Bay have seen foot traffic almost disappear as a result of the COVID-19 lockdown, Link REIT’s 126 local community shopping centres – mainly located in housing estates – have fared better.
“With a portfolio that is dominated by neighbourhood and community retail, Link REIT is less exposed to the big falls in rental that Hong Kong is seeing in central locations – people are still buying groceries and basics – and Link REIT properties are key for this kind of shopping,” said James Hawkey, an independent retail consultant with over 20 years experience advising retail clients in Greater China.
Hawkey added however that the trust’s portfolio is “not immune to the overall trends in the market”.
In spite of the uptick in revenue, Link REIT recorded a full-year loss of HK$17.3 billion due to an 11.6 percent markdown in the valuation of its properties, triggered by a bleaker rental outlook in Hong Kong where 85 percent of the REIT’s properties are located.
“The fall in the valuation of the portfolio is roughly in line with the fall in the overall market,” Hawkey said.
With high street spending taking a nosedive as people make the switch to online shopping, average streetfront retail rents in Hong Kong fell 10.3 percent in the first three months of the year, after dropping 9.7 percent in the final quarter of 2019, according to the latest retail property report by CBRE.
Facing a Tough Year
Occupancy across Link REIT’s Hong Kong retail portfolio remained stable over the 12 months ending 31 March, despite the challenges facing the city, with the trust manager declaring 96.56 percent occupancy at the end of the period, according to the annual report.

Link REIT chief George Hongchoy said it had been a tough year
While vacancy levels have yet to creep upward, the trust did note a drop in its reversion rate in the 12-month period. During the 2019-2020 financial year, Link REIT achieved an increase in income from its new leases of 12.1 percent, according to its annual report. That figure was down from the 21 percent average hike it was able to push through during the previous twelve months, as negotiations to secure higher rental rates from tenants became more difficult as the city’s economy slid.
Link REIT CEO George Hongchoy conceded during the trust’s earnings presentation on Monday that 2020 had been a “tough year” with 35 out of the trust’s 126 retail assets in Hong Kong affected by the social unrest in the city, while all suffered from the lockdown imposed to stop the spread of the coronavirus during the weeks following the lunar new year celebration.
The pandemic presented an escalation of the threat to the REIT’s business from e-commerce, with online shopping in Hong Kong surging despite the Asian financial hub being what the trust’s general manager of corporate development and strategy, Luna Fong, called one of the “last bastions” of bricks-and-mortar retail.
Overall gross sales per square foot for the trust’s retail tenants dropped by 1.7 percent across Link REIT’s portfolio, a shift attributable in part to the switch to online shopping. While the shift to buying online looks set to continue, analysts see the trust’s properties scattered among Hong Kong’s housing estates as more resistant to online competitors in providing household necessities.
“There is no magic recipe for improvement for Link REIT, but given their profile they are well positioned to continue delivering good quality local retail services to Hong Kong residents,” Hawkey said, adding that if the growth of online shopping continues post-COVID-19, it will be a negative for neighbourhood retail.
Link REIT’s Fong said that she believes, however, that if the REIT’s Hong Kong retail properties continue to provide the “right shopping environment” and an “attractive tenant mix”, shoppers will come back once confidence about being in crowded places returns.
Targeting More Overseas and Office Acquisitions
With Hong Kong’s unrest predicted to continue following the passing of new legislation restricting civil liberties, Link REIT said it is targeting assets outside of the Asian financial hub as it looks to redistribute its portfolio away from the region’s most expensive city.
Over the long term, the trust expects Hong Kong to account for between 70 percent and 75 percent of its portfolio value – down from 85 percent as of 31 March 2020 – while increasing its mainland portfolio from 13 percent to around 20 percent, according to Link REIT’s final results announcement released on 1 June.
The trust also reiterated in its results announcement that it will look at mining Australia, Singapore, Japan and the UK for acquisitions, as it aims to top up its overseas portfolio from 1.7 percent to 10 percent.
While Link REIT said retail will remain its focus, it is seeking to up its office quotient from its current 9 percent to between 15 and 20 percent of its total assets by 2025.
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