• The Asia Pacific retail scene continued to paint a diverse picture, swayed by consumer sentiment and tourism trends. While some markets demonstrated resilience, others felt the pinch of economic headwinds on consumer wallets.

• Prime locations in key retail hubs continued to attract firm demand for space. Fashion, lifestyle, food and beverage, and entertainment categories were key drivers of leasing activity. 

• Across most of the region, rents either held steady or saw modest upticks. However, China and Hong Kong bucked this trend, leading to a reversal in the Asia Pacific rental index’s six-quarter growth streak.

The ongoing recovery in inbound arrivals saw tourism-driven retail spending remain robust in specific locations, however, other markets experienced muted consumer expenditure due to ongoing economic uncertainties and cost of living pressures weighing on spending intentions.

Prime retail areas in major urban centers maintained their appeal, sustaining leasing momentum. Retailers, while recognizing the importance of strategic positioning, remained mindful of the economic climate. They adopted nuanced strategies, focusing on enhancing value propositions, in-store experiences, and pursuing measured growth. Leasing activity was primarily driven by lifestyle and fashion retailers, alongside affordable food and beverage concepts expanding with refined offerings.

The fourth quarter marked the year’s peak in new retail supply completions, with Greater China and Bangkok significantly contributing to the increase in prime retail space. Notably, despite this substantial addition, the regional vacancy rate continued a downward trend, extending a pattern that began a year earlier. However, rental pressures in Greater China resulted in a slight quarter-on-quarter decline in the aggregate Asia Pacific rental index.

Outlook
Experiential retail will be central to future strategies, transforming shopping into a more engaging activity. Retailers will likely employ interactive displays, host in-store events, and offer personalized services to craft unique environments, aiming to increase foot traffic and deepen customer connections. This strategy is expected to resonate with the growing consumer appetite for experiences. Landlords are likely to leverage this trend by incorporating sought-after brands to boost their properties’ appeal. Retail completions in 2025 are projected to exceed 2024’s level, potentially creating new growth opportunities for retailers. However, this expansion in stock may also lead to intensified competition, possibly exerting upward pressure on vacancy rates. While Greater China might experience further rental declines, the outlook for other regional markets is more favourable, with expectations of more positive market conditions.