Retail Market Insights

November 29, 2022 / By ,

Asia Pacific markets’ post-pandemic recovery facing new headwinds

More countries and jurisdictions in Asia Pacific moved toward full reopening of their economies and international borders over the quarter, providing a much-needed boost to the retail and tourism sectors in the region. On the flip side, mainland China still maintained a strict zero-COVID policy, dampening consumer sentiment and retail activity. Aside from pandemic-related concerns, inflationary pressures, labour shortages, supply chain disruptions, and rising interest rates are increasingly weighing down on the retail operating environment in some markets in the region.

While global macroeconomic challenges loom, the operating environment continues to stabilise across much of the region. While the aggregate Asia Pacific Retail Rental Index recorded its 12th straight quarter of decline, the magnitude of decline was marginal.

Greater China

Leasing momentum in Hong Kong continued to pick up but at a slower pace than expected, as uncertainties have remained surrounding new COVID-19 outbreaks and the border reopening towards end-2022. Nevertheless, some retailers continued to take advantage of the limited discounted opportunities at certain prime streets and shopping centres. High street landlords generally held firm to their asking rents in anticipation of the border reopening, resulting in a mild rebound in shop rents. Meanwhile, prime shopping centre rents continued to fall.

Shanghai saw total retail sales recover over the quarter as subway passenger traffic and shopping mall foot traffic returned to normal. That said, the effects of 2Q22’s COVID-19 outbreak continued to be felt, with closures of cash-strapped stores contributing to negative net absorption in the third quarter. Both prime ground floor rents and decentralised rents declined, reflecting the challenges faced by both landlords and retailers.

The latest outbreak had a prolonged effect on Beijing’s retail market and contributed to a slow market recovery, with retail sales declining in July and remaining flat in August. Leasing demand remained weak as many fashion brands paused expansion plans following sharp revenue drops, and the recent outbreak also caused a new wave of store closures, especially by F&B stores. This put further pressure on rent growth, and landlords offered greater flexibility on rental terms, such as rent-free periods, to alleviate tenants’ financial pressure.

Retail sales of some chained brands reportedly declined during the quarter due to COVID-19 flare-ups across the country, leading to a slower pace of expansion in Guangzhou. Thus, the overall leasing demand in Guangzhou’s retail market remained sluggish in the quarter. Subdued retail sales further weighed on the rents in malls in non-core and suburban areas.

North Asia

In Tokyo, department store sales increased in August, the 12th consecutive month of increase, while luxury goods continued to record strong sales, outperforming 2019 levels since March. Leasing demand, for ground floor space with high visibility in the city’s prime high streets, was healthy in the quarter. Consequently, rents increased for the second consecutive quarter, due to rent increases in ground floor spaces in both Ginza and Omotesando.

In Seoul, retailers were reluctant to open new stores amid persistent financial volatility as well as eroded market sentiment, resulting in limited new leasing activity in the quarter. Nonetheless, both shopping malls and high streets saw rent increases, though subdued consumer sentiment and slow recovery in tourism limited high street rent growth.

Southeast Asia

Singapore’s continued relaxation of domestic COVID-19 measures and travel restrictions further boosted retailer confidence, which spurred business expansion. As a result, the city saw its fourth consecutive quarter of rent growth of prime floor space, given falling vacancy and improved retailer confidence.

A positive inflow of new tenants into Bangkok’s malls was seen in the quarter, which resulted in an increased net absorption for prime malls. However, this was nearly offset by store closures in some malls. Concerns over the high inflation rate, which increased the cost of living, have limited rental growth.

F&B and fashion occupiers in Jakarta tended to outperform the market and continued to be the most active retail segments in the quarter. In addition to F&B and fashion brands, family-friendly entertainment facilities also continued expanding in a newly opened mall now that children’s playgrounds have been allowed to operate at 100% capacity, continuing a broader trend over the past few quarters. With concerns about the pandemic situation improving and malls enjoying healthy foot traffic, rents crept up slightly in the quarter.

Net absorption in Manila fell into negative territory in the quarter as store closures persisted and select malls closed off sections for renovation or redevelopment. The majority of moveouts consisted of F&B establishments. The postponement of new store openings to 4Q22, in time for the holiday season, also contributed to the quarter’s performance. Nonetheless, retail rents registered positive growth with more retail operators slowly returning face rents to pre-pandemic levels and gradually removing rental assistance to retailers, and with mall foot traffic remaining high.


Most of Mumbai’s leasing activity in the quarter was recorded in the prime south and suburban submarkets. Healthy leasing activity was recorded in the new High Street Phoenix Phase 4. Overall rents increased slightly, backed by improving leasing activity in malls and increased footfall, which allowed developers and landlords to escalate rents with confidence.

With footfall reaching pre-pandemic levels, vacancy in Delhi trended downwards in the quarter. Many domestic and global retailers continued to expand their footprint, and online brands have also made forays into opening offline stores. With leasing activity picking up, rents continued to grow marginally in quality malls across all submarkets.


Heightened cost pressures for businesses, such as a minimum wage increase, higher input prices for manufacturing and supply chain congestion, as well as labour shortages are continuing to weigh on profitability and consequently slowing leasing demand in Sydney and Melbourne. Rents remained relatively stable in Sydney, while more substantive declines were observed in Melbourne.

Retail Outlook

The continued easing of pandemic restrictions and economic reopening should help further along market recovery in many cities around Asia Pacific, and as such, lend support to leasing activity. The recovery around the region should also be further fuelled by a boost in international travel and tourism due to relaxations in cross-border travel restrictions. China, however, remains a notable exception as the government continues to abide by a strict zero-COVID stance. Furthermore, a looming global recession, inflationary pressures and rising interest rates, and geopolitical tensions and uncertainty are some of the key challenges the region faces looking ahead.


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