Lam on Charm Offensive in Davos

Can Carrie Lam persuade world leaders Hong Kong is open for business?

Hong Kong's fearless leader Carrie Lam Cheng Yuet-ngor is in Davos, Switzerland to attend the World Economic Forum in the hopes of persuading leading political and financial figures that our city is still open for business.

Her visit coincides with a report by Moody's Investors Service that has downgraded Hong Kong's rating by one notch to Aa3 from Aa2. In September, Fitch Ratings cut Hong Kong's sovereign rating  to AA from AA+.

"Team HK" is in Davos for the World Economic Forum

Moody's says the downgrading is due to concerns the government has not been able to quell the political and economic issues from eight months of protests.

"The downgrade principally reflects Moody's view that Hong Kong's institutions and governance strength is lower than previously estimated," said Marie Diron, managing director of Moody's sovereign risk group, and Martin Petch, vice-president and senior credit officer of sovereign risk group, said in a statement on Monday night.

"The absence of tangible plans to address either the political or economic and social concerns of the Hong Kong population that have come to the fore in the past nine months may reflect weaker inherent institutional capacity than Moody's had previously assessed," the New York-based credit rating agency said.

Protests are still happening, one of the latest in Landmark

It described the government's response to demands for greater political freedoms and expensive living costs as "notably slow, tentative and inconclusive".

"It may also point to more significant constraints on the autonomy of Hong Kong's institutions than previously thought," the agency added, hinting pressure from Beijing.

This is a pretty big strike against Lam and her administration, who are bringing "Team HK", including the trade secretary, top officials from the stock exchange, airport authority, MTR Corp and the head of Swire Group to the Swiss mountain resort.

But perhaps a more eminent threat is the Wuhan pneumonia that is spreading quickly (or we just haven't been told the truth about it all along), and it is only a matter of time before the first confirmed cases are in Hong Kong.

The corona virus in Wuhan is spreading very quickly

If Hong Kong does experience another SARS outbreak, that will be a double blow to the city's economy that has already been battered by the protests.

News of the pneumonia-like virus spreading resulted in Asian stocks taking a battering, and Hong Kong more so with the downgrade from Moody's.

How is Lam going to convince world leaders that she can lead the city out of these crises? She hasn't demonstrated any kind of leadership in the past eight months...

Tone Deaf Landlord

Louis Vuitton behind this protest sign will be closing its shop in Times Square

Of all the luxury brands, looks like Louis Vuitton is cutting its losses first.

After seven months of protests in Hong Kong, the French name brand is closing one of its eight stores in the city.

Times Square's owner Wharf Reic refuses to lower rents

The world's top luxury name is pulling out of Times Square in Causeway Bay, after landlord Wharf Reic refused to lower the rent on its second-floor space. Louis Vuitton currently pays around HK$5 million (US$642,000) a month in rent.

According to the Hong Kong Tourism Board's latest figures, only 2.65 million people visited in November 2019, a decline of 56 percent from the same period last year.

Other brands like Moncler, Gucci and Salvatore Ferragamo have seen sales plunge as much as 45 percent in Hong Kong during the third quarter. LVMH reported a 25 percent decline for its Hong Kong sales in the same period.

The mainland customers who use to deluge luxury stores in Hong Kong daily are now staying at home to shop, with prices becoming more competitive in China. Previously luxury sales in Hong Kong were driven mainly by international travelers, with visitors from the mainland accounting up to 70 percent of luxury goods sales.

Hong Kong Land has offered concessions to tenants

While it's understandable Louis Vuitton wants to minimize its losses, landlord Wharf Reic is hardly being sympathetic to the situation. Meanwhile Swire Properties that owns Pacific Place in Admiralty, and Hong Kong Land, with The Landmark in Central have offered a series of measures to tenants, including rent concessions.

Is this wishful thinking on Wharf Reic's part in expecting the protests to end soon? Or is the developer completely tone deaf to what has been happening for the past seven months?

Everyone has been financially affected by the protests in the city, one way or another. Job in the hospitality industry are being cut, shops closing down as well as restaurants. Perhaps telecom and internet companies are benefiting from all the communications and online use, but most of us and the city as a whole have been affected for over half a year.

Swire Properties has also helped ease rent pressure for tenants

And the unrest is expected to continue in 2020, with Chief Executive Carrie Lam yet to find out way out of this political crisis. The economy is not expected to return to pre-protest levels within this year, maybe 2021 if some kind of political resolution is found soon.

So for Wharf Reic to refuse to lower rents is hardly helpful in keeping Hong Kong's economy going, and in the developer's best interests, wouldn't it be better to have a giant prime retail space occupied than left empty? Hard to understand Wharf Reic's strategy when everyone is else is working together to find a way to stay afloat...

Truly Minimalist Living

Can you imagine living in a space slightly larger than this parking spot?

Last week we talked about some really tiny flats. There's more.

Swire's Star Studios on Wing Fung Street has studio flats are only 142 square feet.

That's 10 sq ft bigger than a standard private car parking space, according to the Planning Department.

Swire has units at Wing Fung Street that are 142 sq ft

The development, adjacent to Three Pacific Place in Wan Chai, has 120 units, six of them 142 sq ft, and 60 percent of them ranging from 206 to 240 sq ft, the largest ones are 490 sq ft.

These flats will be smaller than AVA62 in Jordan that currently has the smallest flats on the market at 152 sq ft.

"Hongkongers have to sacrifice their living quality as the sky high property prices and rents have gone beyond the reach of the general public," says Pang Shui-kee, managing director of SK Pang Surveyors.

Peggy Chan, local director of Hong Kong residential at JLL, estimated the monthly rent would be about HK$90 per sq ft, which meant the tiniest flats would cost HK$12,780 per month.

But before your jaw drops further, Swire's development, that will be available in the fourth quarter, will probably be in demand because it is located in between Wan Chai and Admiralty, near restaurants, public transport and Central.

At least there are lots of restaurants downstairs to choose from

It's amazing how much developers/landlords are asking for in terms of rent, but we also have to wonder how you live in such a small space? Obviously a bed is a priority, but then what else? Where do you put all your stuff? Sounds like hard core minimalist living.

But more importantly, at what point will the tiny size of the flat be considered inhumane?