Retail rents in Hong Kong, among the most expensive in the world, fell sharply in the third quarter, property consultancy CBRE said on Tuesday, following protests that have pushed shop sales to a record low.

High street retail rents fell by 10.5 percent in the July-September quarter compared to the previous quarter, which is the sharpest quarterly decline since the first quarter of 1998 at the time of the Asian financial crisis, said CBRE. 

Overall high street rents are likely to decline by another 5-10 percent over the remainder of 2019, the consultancy said.

The landlord of an 11,600-square-foot (1,078 square meters), three-story shop space in a prime shopping district Causeway Bay, has cut off rent by more than 30 percent, according to realtor Midland IC&I.

The space will be leased for a monthly 480,000 HK dollars (roughly 61,196 U.S. dollars) to a claw crane arcade this month, down sharply by 31 percent from the 700,000 HK dollars charged from the home appliance chain Fortress before that lease expired last October.

The protests have heavily hammered on tourism and consumer spending.

Read more: Hong Kong tourist visits fall by about a third amid ongoing protests

Read more: Hong Kong retail sales drop by 23 percent as protests escalate

"There's very few rental transactions; people are not making offers, they're pessimistic about the outlook and want to observe more," said Daniel Wong, CEO of Midland IC&I.

On the positive side, however, there have not been many lease terminations yet, he added.

A Midland survey published last month showed vacancy rates in Hong Kong's four core shopping districts rose only slightly to 6.5 percent in the third quarter, up from 5.6 percent a year ago.

The realtor expected rents for core district street shops to decline by 10-15 percent in the second half, and the vacancy rate to rise to up to 8-9 percent next year.

The government said last week at least 100 restaurants have closed in the past few months and has repeatedly urged landlords and property developers to offer rent subsidies to retailers and food and beverage businesses.

MTR Corp, the subway operator, which is about 75 percent owned by the government and itself owns some shopping centers, said it would refund rents and other charges on a pro-rata basis to its tenants for the time it shut the stations or centers.

Read more:

Hong Kong MTR Corp and Airport Authority plan to offer rent cuts to retailers affected by protests

MTR, together with major shopping mall developers Henderson Land and Hysan Development, have offered some tenants temporary rental adjustments. Henderson and Hysan have also launched promotions to attract retail customers.

Lawrence Wan, senior director of CBRE Hong Kong retail advisory & transaction services, said some retailers have negotiated with landlords to restructure their lease. That would allow them to pay lower rent for two to three months, and then settle the difference when the business environment stabilizes.

Some also looked for short-term leases of three to six months and put expansion plans on hold.

"We have got more clients asking about short-term leases. People want to see if they could get more business in the festive season," Wan said, citing fashion outlets hoping to clear in-season stock during Christmas and Chinese New Year.

(With input from Reuters)