• Demand in the region remains firm with foot traffic in many key retail hubs bolstered by healthy levels of inbound tourism, reinforcing the ongoing confidence in the retail sector.
• Fashion and F&B amongst a diverse range of retailers drive a pickup in quarterly net absorption figures as new outlets get launched in leading shopping centres and areas favoured by tourists. As a result, 14 markets were in positive rental growth territory regionally.
• Regional vacancy edged lower for a second consecutive quarter as retailer’s expansionary demand remains resilient and supply volumes shrink compared to last quarter.

Domestic spending in the region remained mixed in the first half of the year as elevated interest rates and economic uncertainty weighed on domestic demand, leading to moderated retail sales growth in many markets regionally. However, dampened domestic spending was partially offset by an uptick in inbound tourism in parts of the region, particularly Japan. A weaker yen boosted consumer spending from foreigners, with increased foot traffic in prime high streets at core locations supporting demand for expansion.

Regional vacancy edged down for a second consecutive quarter to 8.5%, as positive quarterly take up saw an increase in rent growth, with F&B being a key driver of leasing demand. In Mainland China and Hong Kong, a focus by consumers on value-for-money saw leasing activity driven by brands viewed as affordable, and many landlords capitalized on this trend to adjust tenant mixes. In contrast, occupier demand in Southeast Asia and India remained solid and major shopping mall landlords implemented strategies to enhance the overall shopping experience for consumers. An emphasis on quality prime retail space at strategic locations continues to drive divergence in the leasing market as retailers adapt to changing consumer spending patterns.

Outlook
We expect to see incoming supply peak in 2025, with eight markets slated to see completed supply top 200,000 sqm, potentially elevating vacancy rates in the region. Retailers are poised to keep a key emphasis on improving in-store shopping experiences. Despite an expectation of lukewarm consumer sentiment and shift in domestic spending patterns as consumers remain cost-conscious, a resurgence in international travel should continue to stimulate expenditure in F&B and lifestyle segments, supporting rental growth in most Asia Pacific retail markets in 2024.