Retail Market Insights

February 28, 2023 / By ,

Despite global economic headwinds, many Asia Pacific markets display resiliency

Against the backdrop of an inflationary environment and slowing global economy, the reopening of economies in Asia Pacific as well as healthy domestic consumer sentiment continued to drive market momentum and propel leasing activity across much of the region. China’s sudden dismantling of its zero-COVID policy in December and rapid reopening of its international borders in January has also provided retailers with cautious optimism, as countries in the region anticipate the return of Chinese tourists. On the other hand, continued inflation, heightened interest rates, labour shortages and the global economic slowdown remain as downside risks for some markets in the region.

Against the backdrop of the resilient performance of the retail sector in markets around the region, the aggregate Asia Pacific Retail Rental Index reversed twelve straight quarters of decline, registering a marginal increase during the quarter.

Greater China

Leasing transaction volumes in Hong Kong contracted compared to the previous quarter given the current economic uncertainties and softened business sentiment. Nonetheless, leasing demand from the F&B and mass fashion segments remained relatively strong. Rents in some of Hong Kong’s high street districts dropped due to the absence of inbound travellers, while rents for shopping centres remained relatively stable.

Continued pandemic concerns in Shanghai weighed further on consumer sentiment, leading to negative net absorption in the quarter. Nonetheless, a few sectors remained resilient, with new leases mainly coming from luxury retailers, the sports apparel and equipment sector, and new energy vehicle (NEV) showrooms. Meanwhile, the decline in prime ground floor rents narrowed in the quarter, and decentralised ground floor rents also fell amid pressure from rising vacancy.

Beijing’s retail market was affected by the COVID-19 outbreak in November, and leasing demand weakened with the F&B and fashion sectors accounting for the majority of space surrendered. On the other hand, sportswear and NEV retailers continued to actively seek leasing opportunities. As leasing demand weakened further, overall rents continued to decline, and an increasing number of landlords were willing to offer lower rents and more flexible terms to attract retailers.

Overall leasing demand in Guangzhou’s retail market declined in the quarter, as a COVID-19 outbreak resulted in plummeting retail sales across many sectors as well as the forced shutting down of some shopping malls temporarily. Under such circumstances, landlords prioritised maintaining occupancy and were willing to offer lower rents for new leases as well as lease renewals.

North Asia

In Tokyo, consumer sentiment recovered across all retail sectors on the back of the complete lifting of mobility restrictions. Department store sales continued to recover in November, with luxury goods outperforming 2019 levels, supported by domestic customers. As a result, demand for ground floor space in the city’s prime high streets with high visibility remained healthy in the quarter. Consequently, rent growth accelerated for the third consecutive quarter, driven by rent increases for ground floor spaces in both Omotesando and Ginza.

In Seoul, both prime shopping malls and prime high streets enjoyed improved occupancy, the latter especially on the back of the reopenings of cosmetics and fashion stores in Myeongdong high street. Hence, both shopping malls and high streets rents increased, especially as there are signs of recovery in footfall for both local and foreign tourists.

Southeast Asia

Leasing demand in Singapore was healthy as opportunistic businesses with deep pockets continued to tap on the attractive rents and prominent locations in malls in the Prime submarket. As a result, rents for the city’s prime floor retail space continued to rise in response to falling vacancy and the reopening of the domestic economy.

In Bangkok, the recovery of footfall and the rise in consumer confidence drove healthy demand, with more than 27 brands officially announcing plans to open new stores. Moreover, the return of tourists increased foot traffic in key destination retail centres, which also boosted demand in prime retail centres. Despite healthy leasing demand, operating expenses rose as a result of higher inflation, economic uncertainty and an increase in common area maintenance (CAM) fees, which limited net effective rental growth.

Due to the resilient business environment, retailers maintained a positive outlook in Jakarta but were cautious about expanding their businesses. F&B operators continued to generate most of the demand among retailers in the quarter. As a result, rents have increased slowly but steadily in the city.

Manila recorded positive net absorption in the quarter, a contrast from the negative value registered in the previous quarter. The opening of new stores leading to the peak holiday season, as well as the reduction in store closures, contributed to the positive performance. Backed by a stronger leasing market, retail rents showed healthy growth in the quarter and moved closer to pre-pandemic levels.


Net absorption in Mumbai was relatively muted in the quarter, given the absence of any mall completions. Most of the city’s leasing activity was recorded in the Prime South and Suburban submarkets. Nonetheless rents increased slightly in the quarter, backed by increased retail footfall, which allowed landlords to harden their stance during negotiations. Leasing activity in Delhi was robust in the quarter, driven by the completion of a new mall in the Suburban submarket. The Prime South submarket also witnessed international as well as homegrown brands opening their flagship stores in the country. Rents remained stable across the city’s submarkets.


Heightened cost pressures for businesses weighed on profitability and consequently leasing demand in Sydney. In Melbourne, foot traffic during Black Friday was significantly less than pre-pandemic years. Across Australia’s major cities, rents for regional centres remained stable.

Retail outlook

Looming recessions in major world economies such as the United States and Europe may drag on global economic growth over the year. Moreover, inflation in many countries remains high and interest rates elevated, although there are indications that policy rate hikes may peak in 2023. Against this subdued global backdrop, domestic consumer sentiment and spending within Asia Pacific is still expected to remain relatively resilient given sustained tailwinds from the region’s economic reopening and continued relaxations in cross-border travel restrictions. The gradual return of Chinese tourists is also likely to provide another boost to retail markets around the region. Overall, it remains to be seen how this confluence of factors regionally and globally will play out in the region’s retail markets in the coming quarters.



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