Affordable consumption underpins leasing demand

• The accumulated retail sales in Guangzhou improved by 0.3% y-o-y by November, marking weak growth momentum in consumption. Boosted by the trade-in policy, sales for home appliances and audio-visual equipment lead the recovery.
• F&B remained the most active sector and accounted for over 40% of the new area leased in Q4 2024. The quarter also observed a significant rise in the proportion of new leases for entertainment related tenants, from 3% to 14%.

One project launches with high occupancy

• Canton Tower Plaza was launched in late December. It is adjacent to the landmark Canton Tower and introduced various Chinese and Guangzhou debut stores to local consumers. Thus, it successfully drew in a considerable number of tourists upon opening.
• The urban vacancy rate declined by 0.6 ppt to 4.9%. Beijing Road and ZJNT were filled by entertainment and F&B tenants. The suburban vacancy rate saw a slight increase of 0.2 ppts to 3.0%, mainly due to a vacancy rise in the Huadu District.

Retail rents keep trending downward

• Retailers continued to exercise caution about expansion, waiting for tangible business growth to be observed. Many projects persisted in adjusting rents downward as a strategy to guarantee occupancy, including the core projects in Tianhe North.
• Tenants remained concern about sales and kept a close eye on the rent-to-sales ratio. Given the demand contraction, landlords had to reduce rents. Urban rents declined by 2.1% q-o-q on a chain-linked basis, while suburban rents experienced a bigger decrease of 3.1%.

Outlook: More policies are expected to stimulate consumer confidence

• The local government is offering more subsidies to the public to encourage travel, dining and electronic device and home appliance upgrades. These initiatives are set to further support consumption recovery, providing some confidence to the retail market.
• As for the Guangzhou retail market, supply is predicted to stay relatively limited in the coming years, helping to ease the competition. Nevertheless, the improvement of demand will take time. Consequently, rents are expected to remain under pressure in the near future.