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LCQ3: Management of retail facilities in public housing estates

     Following is a question by the Dr Hon Fernando Cheung and a reply by the Secretary for Transport and Housing, Professor Anthony Cheung Bing-leung, in the Legislative Council today (March 16):


     It has been reported that the stall operators of Chung On Market under Link Asset Management Limited (the Link) were notified by the single operator in December last year that stall rentals would be raised by 20 per cent to more than 30 per cent, and they needed to share huge renovation expenses. Furthermore, as the stall operators of Cheung Fat Estate Market under the Link were worried that there would be a significant rise in stall rentals, they launched a seven-day strike last month to urge the Link to shelve the proposal of contracting out the operating right of the market. On the other hand, it has been reported that the Hong Kong Housing Authority (HA) has recently contracted out the operating right of the newly completed Hung Fuk Market. Some public rental housing (PRH) residents have pointed out that contracting out the operating rights of PRH markets and operating them under the commercial principle of accepting the highest bid will result in incessant rise in stall rentals, and the increase in costs will ultimately be shifted to PRH residents. Moreover, contracting out the operating rights of markets has caused inconvenience to the grassroots (especially people with impaired mobility), because they need to travel to other districts to buy daily necessities to cut expenses. In this connection, will the Government inform this Council:

(1) among the markets under HA, of those which are currently operated by single operators, and whether the relevant operating rights were granted to bidders offering the highest bids; whether HA has monitored the level of rentals charged by the single operators;

(2) given that a number of public housing estates will be completed in the coming few years, whether HA will consider managing the markets of these estates on its own; if HA will, of the details; if not, the reasons for that; and

(3) given that the Link has divested and sold its shopping malls and markets in public housing estates one after another in recent years, whether the Government will reconsider buying back these facilities and managing them on its own, so as to ensure that PRH residents will be provided with affordable goods and services?



     Commercial facilities under the Hong Kong Housing Authority (HA) are operated under prudent commercial principles, and the letting arrangements will be flexibly adjusted according to market needs. Communication with the commercial tenants and residents will be maintained in the process in order to improve the business environment in a timely manner.

     My consolidated reply to the various parts of the question raised by the Hon Fernando Cheung is as follows.

     HA has adopted a single-operator letting arrangement for its markets since 1988, i.e. a single tenancy is awarded to an operator who will let parts of the leased area to individual stall operators, and will be responsible for the management of the whole market.  Such practice allows HA to leverage on the expertise and experience of the private sector with a view to providing better shopping choices, services and environment for residents. Since 1997, all HA's new markets have adopted the single-operator letting arrangement. For the effective implementation of the single-operator letting arrangement, following a comprehensive review in 2002, HA has refined the arrangement and put in place a series of measures, including to regulate the trade types, enhance protection for stall operators, adopt a more comprehensive performance appraisal system and enhance the transparency, with the view to fostering a friendly and cooperative relationship between the single operator and the stall operators.

     There are currently 21 markets under HA, five of which are single-operator markets (SOMs), while the remaining 16 markets are directly leased to individual stall operators by HA.  Details are at Annex One.

     Persons who are interested in leasing SOMs shall apply for registration in the Client List for SOM (the Client List) and meet the eligibility criteria with regard to the experience and expertise in market management (Note: There are a total of nine operators in the Client List at present). HA would normally invite those in the Client List to bid for the market in a new public housing estate six months before completion. All bidders must fulfill certain experience requirements. The Housing Department (HD) will allot separate scores on the basis of bidders' past performance in market management and the rentals proposed for the leasing proposals. These two aspects carry equal weight so that selection is not merely based on the highest rentals proposed.

     As regards monitoring single operators, while rentals for individual stalls are determined through negotiations among the single operators and stall operators themselves, HA will, by means of standard tenancy terms, restrict the single operators from charging stall operators fees apart from rent, air-conditioning charges, rates and management fees, and request the single operators to provide sufficient manpower for management and maintain 24-hour security services. The tenancy agreements also stipulate that single operators shall ensure that the premises are to be operated as a traditional market with the provision of a certain proportion of food and miscellaneous trades, and shall submit to HA a monthly return, setting out all fees collected from stall operators. An extract of such requirements is at Annex Two.

     Frontline staff of HD will carry out regular inspections on markets to ensure that the single operators comply with the tenancy requirements, maintain quality management services and establish good relationship with various stakeholders including stall operators, etc. HD will assess the performance of single operators every two months, taking into account feedbacks from Estate Management Advisory Committees. Whether the daily operation of the market has been effectively and smoothly discharged by the single operator is the most important factor in HA's consideration as to whether to award a renewal of tenancy.  HD will arrange meetings with those who fall short of expected standard, i.e. failing to observe all the tenancy requirements, and issue warnings to them. If poor performance persists despite the warnings, HA has the right to terminate their contracts before the expiry of tenancies and not to invite them to submit bids for other SOM contracts for a specified period of time.

     The current mode of management and operation of SOMs under HA has effectively run for years. Hence, the same mode will be adopted for newly completed markets in public housing estates. As for those markets which are still directly managed by HA, given most of them are located in aged public housing estates with smaller scale and limited market potential, it would be difficult to find single operators to take up those markets.

     With the objective of enabling HA to focus on its core function as a provider of subsidised public housing and to improve its financial position, HA divested part of its commercial and car parking facilities to the Link Real Estate Investment Trust (now known as Link) in 2005. The Government has already explained at various meetings of the Legislative Council that buying back Link or its facilities would be incompatible with public interests and the principle of prudent financial management. The Government will not consider this move.

     Currently, HA manages the commercial and retail facilities in 46 public housing estates (including 33 shopping centres and 21 markets), and will provide retail premises and markets in new public housing projects, taking into consideration the actual circumstances.  A total of 12 new HA markets are expected to be completed in the coming five years.

     Pursuant to the assignment deed between HA and Link in 2005, while Link is entitled to dispose of its facilities, its successors in title (i.e. new owners) will still be bound by the restrictive covenants in the assignment deed between HA and Link, including to continue letting designated commercial units at concessionary rent to non-profit-making organisations and education bodies nominated by Government departments. In case of non-compliance, HA will take corresponding actions.

Ends/Wednesday, March 16, 2016
Issued at HKT 17:50


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