Purpose

This paper informs Members of the results of the rent re-assessment exercise of the Housing Authority (HA) for its commercial premises and the additional measures to be taken to alleviate business hardship of the commercial tenants.

Results of rent re-assessment

2. The Housing Authority has completed the rent re-assessment exercise for those tenancies that commenced or were renewed between 1 January 1996 and 31 January 1998. 8,191 tenants, out of a total of 9,400 eligible tenants, have applied for rent re-assessment. The details of the results are given at Annex A.

3. Tenants dissatisfied with their individual rent re-assessment result may request for a review of assessment by providing supplementary information or rental evidence. Up to the end of November, 85 tenants have applied for a review of their reassessment. Their applications are under processing.

Vacancy rate

4. The overall vacancy rate of the HA commercial premises has been kept at a low level despite the current economic downturn. From January 1997 to September 1998, the vacancy rates of the HA commercial premises were as follows:

Year	Quarter	Vacancy Rate (%)	Vacant Area (m2)
1997	1st	2.5	21,108
	2nd	2.8	24,111
	3rd	2.9	25,192
	4th	2.9	24,866
1998	1st	3.5	30,789
	2nd	4.7	42,109
	3rd	4.9	43,904

5. The Housing Authority has been monitoring closely the situation and has introduced a number of measures to improve the occupancy rate. These include, for example, simplification of letting procedures, and arrangements for "walk in" application for vacant premises that have not been successfully let out by open tender. Over sixty shops have been leased through "walk-in" application arrangement since its introduction in August 1998. In addition, the Housing Authority will review the rent and designated trade after each unsuccessful letting exercise.

6. The Housing Authority will continue to ensure that designated trades are in line with market demand and will introduce new trades to enhance the overall trade mix in public housing estates where appropriate. Rent levels will also be adjusted in tenancy renewals where necessary.

Additional measures

7. To assist the commercial tenants under current economic conditions, the rents of all tenancies due for renewal between 1 February 1998 and 31 December 1998 are being frozen or reduced. Members may refer to Annex B for a detailed breakdown of the renewed rents. The Housing Authority, however, recognizes that the rent levels of some tenancies renewed between 1 February 1998 and 31 December 1998 are still relatively high when compared with those established under the rent re-assessment exercise as at 1 July 1998. Therefore the Commercial Properties Committee of the Housing Authority endorsed on 26 November 1998 that the rent re-assessment exercise be extended to cover those tenants with tenancy renewals between 1 February 1998 and 31 December 1998. Their rents will be re-assessed with reference to the market conditions as at 1 July 1998 and be reduced for the residual term commencing 1 January 1999.

Conclusion

8. To recapitulate, the Housing Authority has taken various positive measures to relieve the hardship of its commercial tenants. The Housing Authority will continue to monitor market conditions closely.

Housing Department
December 1998

Annex A

Rent Reduction	Shops	Market Stalls	Cooked food Stalls	Factory	Total
0% - 9.9%	118	37	1	0	156
10% - 19.9%	997	960	124	805	2286
20% - 29.9%	1281	1664	94	969	4008
30% - 39.9%	498	445	3	20	966
40% - 49.9%	56	39	0	16	111
50% & above	29	32	2	1	64
Total	2979	3177	224	1811	8191

Annex B

	Percentages	No. of Cases	Total
Tenancy renewals with rent reduction	Over 40% 35.1% - 40% 30.1% - 35% 25.1% - 30% 20.1% - 25% 15.1% - 20% 10.1% - 15% 5.1% - 10% 0.1% - 5%	22 16 29 114 204 294 241 144 39	1103
Tenancy renewals with no rent changes	0%	287	287
Tenancy renewals with rent increase (note)	0.1% - 5% 5.1% - 10% 10.1% - 15% 15.1% - 20% 20.1% - 25% 25.1% - 30% 30.1% - 35% 35.1% - 40% Over 40%	223 372 386 352 155 58 23 9 35	1613
			3003

Note: The rents for these tenants have been frozen for one year. Tenants will therefore be paying the renewed rents for the residual term of the lease after the 12 months rent freeze period.