• Major retailers maintain interest in premium locations, with apparel, F&B, and entertainment brands leading leasing momentum amid economic uncertainties.

• Vacancy edges higher despite a drop in new completions. Rental growth slows overall, dragged by Greater China’s weakness, as other markets hold firm or post modest gains. 

• Asia Pacific retail markets set to see continued performance divergence. Ongoing macro risks will likely shape consumer sentiment and retailer strategies differently across the region.

Asia Pacific retail markets exhibited diverse performance in Q1, with consumer caution rising in some areas while tourism recovery bolstered activity in others. Despite pockets of weakness, the broader retail market maintained generally firm occupier demand. Many retailers adopted a strategic approach, focusing on store optimization and measured expansion. Some embraced pop-ups and shorter-term leases to test concepts before committing long-term.

Q1 saw a marked deceleration in shopping centre supply, reaching a seven-quarter low, yet vacancy rates edged upward due softening demand in select areas, strategic tenant reshuffling and asset enhancements. Notably, landlords remained focused on refining tenant profiles to maintain asset performance. Aggregate rents declined marginally quarter-on-quarter, primarily due to weakness in Greater China, while other markets demonstrated resilience.

Despite economic headwinds, certain retail segments demonstrated remarkable resilience. Lifestyle brands and food establishments led in space acquisition, capitalizing on shifting consumer preferences.

The gradual recovery of inbound visitation also stimulated leasing demand in key retail hubs, primarily driven by tourism-oriented and mass-market categories.

Outlook

Consumer spending growth is expected to remain positive in most major markets in 2025, though sales may slow in areas affected by growing consumer caution. Retailer demand is anticipated to sustain for premium space with F&B still playing a key role. Competitive pressures are nonetheless likely to drive innovative retail concepts as landlords and retailers strive to differentiate their offerings. The trend towards experiential retail is set to persist, with a focus on curated, interactive environments. The introduction of new retail centres will create a dynamic landscape, likely contributing to further downward pressure on rents in China as landlords maintain an accommodative stance, simultaneously offering expansion opportunities for retailers in areas facing firmer conditions.