Consumption stimulus policies present opportunities for specific sectors

• Leasing activity remained subdued in Q1 2025, as brands across various sectors remained cautious about expansions and renewals. As a result, Shanghai’s retail net take-up recorded -130,100 sqm during the quarter.
• Fueled by consumers’ focus on healthy lifestyles, entertainment and value for money, several growth sectors, including sportswear, collectible toys, pet services, VR experiences and affordable dining, continued to gain momentum despite cautious market sentiment.

No new retail projects launched in Shanghai’s urban area in Q1 2025

• No new supply was delivered in Shanghai’s urban area in the quarter. Intense competition, coupled with cautious leasing momentum, put the market under pressure. Prime market vacancy rose 0.8 ppts to 9.9%, while decentralised market vacancy increased 0.7 ppts to 13.8%.
• In response to heightened competition, many landlords proactively implemented changes through repositioning, renovations and brand-mix adjustments to enhance asset performance.

Rents remain on a downward trend

• Rental decline continued in Q1 2025, reflecting cautious market sentiment. Average ground floor rents in prime areas decreased by 1.4% q-o-q to RMB 43.5 per sqm per day, while decentralised areas fell by 1.6% q-o-q to RMB 15.2 per sqm per day.
• CPPIB sold its 49% interest in four real estate JV projects with Chinese real estate company Longfor Group Holdings to an affiliate of Dajia Insurance Group. The transaction primarily involved four retail malls located in Shanghai, Suzhou, Chengdu and Chongqing.

Outlook: More supportive policies are expected to boost consumption

• China’s focus on boosting consumption in 2025 will involve a combination of policy support, which is expected to enhance retail leasing activities in sectors such as sportswear, entertainment, collectible toys, smart home appliances and 3C electronics.
• Eleven new shopping malls, adding 887,000 sqm of retail space, are scheduled to enter the Shanghai retail market in 2025. This influx of supply will continue to exert downward pressure on rents, and the market is expected to remain tenant-favourable.