Day Of The Landlords

From the letters page of the SCMP a week or so ago:

Day of the landlords

William Dixon, the writer of the letter "Greed bound to backfire" (April 1), should realise that the first step in any entrepreneurial activity is to understand market forces. The market is a harsh mistress to landlords and tenants alike. Landlords go out of business during periods of rent depression - to little public wailing and gnashing of teeth.

Andrew Rolfe, former chief executive of Pret A Manger, grudgingly noted in his speech at the opening of the company's first Hong Kong shop that all work goes to pay the rent, commenting: "I hope in my next life to be born a Hong Kong landlord."

That every vacated shop on Lyndhurst Terrace is now being occupied by a prestigious new tenant only serves to prove the market is on the side of the landlord this time. It worries every small operator, but it is one of the costs of doing business.

As a restaurant owner in Central, I am always wary of the power the landlord has over my business. The only way to avoid it would be to raise significantly more capital at start-up and become the landlord myself. But do you think the mortgage lender would be any more forgiving than the landlord in terms of interest rate hikes and the like?

CHRISTOPHER GALLAGA, Ma Wan

Comparing the rampant greed of many Hong Kong Landlords with mortgage providers is not really fair. Mortgage lenders don't usually triple their fees overnight. Having the mortgage to your own restaurant would be vastly preferable to depending on some parasite not tripling your rent with no warning.

As to landlords going out of business, I'd really love to see examples of Hong Kong Property companies actually going out of business. I think some smaller ones might have not had enough inertia to survive the recent stagnant rents (it never really went down), but any company which acquired properties before 1997 could sell their properties at a profit anyway. It was always only those who bought at the top of the market who were seriously burnt by the downturn.

The basic fact of the market is that Hong Kong landlords are not taking a big risk in terms of their own outlay, but they require that every one of their tenants be prepared to write off the costs of outfitting their premises on a yearly basis.