What: Retail rents in Hong Kong are at decade lows as the territory looks to re-open from strict Covid-19 restrictions.

Why is it important: Tenants have already started renegotiating leases by exercising bargaining power ahead of a proposed law that will allow a moratorium on payments. Government pressure and the need to keep retailers’ businesses afloat have also prompted property owners to offer discounts.

Owners of malls and street shops are struggling to get rents back to pre-pandemic levels that made Hong Kong one of the world’s most expensive markets. That’s hurting a key source of income for developers at a time when the residential and office sectors are also under pressure following the government’s strict response to the health crisis.

Lawmakers are expected to pass a bill as soon as this month that will give tenants a three-month grace period on rental payments after Covid restrictions left stores shut or deserted and caused retail sales to plunge. Those that renew rents won’t be subject to the relief, giving them leverage to ask landlords for discounts instead.

While the government’s latest round of consumption vouchers distributed in early April are set to boost retail sales in the city, they may not be enough to lift all businesses out of their misery.

Hong Kong landlords brace for deeper cuts in retail rents