APPD Market Report Article


May 26, 2024

Mi Yang, Head of Research, North China


RMB 757


Improvement in market sentiment drives demand surge

  • The robust consumption rebound has led to a steady recovery in leasing demand, with the absorption figure exceeding levels from the past two years. New projects that entered the market by 2023 with low opening rates have benefitted the most from this demand boom. The vacancy rate for most projects was decreased to below 10%, highlighting their quick absorption capacity. 
  • The increased store openings of new brands from various sectors, including F&B, fashion, lifestyle and NEV, indicated market confidence and a positive expansion trend. Retailers selected mature projects for store expansion, prioritising stable foot traffic from their loyal customers.

Vacancy rates return to pre-COVID-19 levels

  • During the quarter, three projects totalling 183,000 sqm were launched in the Urban market, while one project of 200,000 sqm opened in the Suburban market. Despite the robust market demand, the substantial scale of the supply wave and retailers’ hesitancy to open stores in unproven new projects have posed challenges in achieving full occupancy. 
  • The average opening rate stood at 70%, with pop-up stores and theme blocks enhancing their initial appeal. However, the sizeable destocking of existing vacancies across the city has alleviated the vacancy pressure posed by new supply. The overall vacancy rate has returned to pre-pandemic levels, with the Urban and Suburban vacancy decreasing by 0.7 ppts to 5.2% and 0.3 ppts to 6.4%, respectively.

Rent accelerates with highest quarterly growth since 2019

  • Most landlords adjusted rents to align with their higher revenue targets for 2024 compared to 2023. Additionally, newly opened projects in 2023, which initially had lower rent bases, have stabilised their operations in the first quarter and are now undergoing rent recovery. 
  • In the Urban market, rents rose by 1.3% q-o-q. In the Suburban market, rent growth surged by 2.8%, rebounding to the 2021 level for the first time. However, rents across the city are still a long way from pre-COVID-19 levels. 

Outlook: Optimistic demand outlook to further stimulate rent growth

  • The demand surge is expected to continue throughout the year. Increased leasing activity enables landlords to upgrade their tenant mix by selecting higher-positioned brands from active enquiries. As these tenants typically process good purchasing power, it is anticipated that overall rent levels will adjust upward after their leasing deals are finalised. 
  • By end-2024, the vacancy rate will decrease by 0.1 ppts in the Urban market and by 0.5 ppts in the Suburban. The overall rent level is forecast to follow a high-growth trajectory, with the Urban and Core markets experiencing the largest y-o-y growth rates of 3.9% and 2.3%, respectively.

Note: Beijing Retail refers to Beijing's Urban retail market.

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