Leasing demand from F&B and sports-related retailers is stable

• Leasing activities slowed down slightly, with F&B leading at over 40% of the total leasing area. Growth in outdoor activities and fashion trends favoured outdoor sports brands, which accounted for over 30% of the newly leased area within the fashion category.
• Since the implementation of the trade-in policy, demand for consumer electronics and home appliances has remained strong. Within the lifestyle category, smart home devices, digital products and automobiles tenants occupied 60% of the new leases by area.

Citywide vacancy experiences a slight increase with no new supply

• No new projects entered the market this quarter. Due to certain poorly operated projects in the Nanshan and Futian districts, the urban vacancy rate rose marginally by 0.7 ppts q-o-q.
• The vacancy rate in the suburban sub-market was stable, increasing by 0.2 ppts q-o-q. Retail markets in remote outskirts remain underdeveloped, with shopping malls in these areas experiencing prolonged vacancy periods.

Rent level further edges downward

• The overall rents decreased by 2.2% q-o-q on a chain-linked basis in the quarter. Facing heightened competition, shopping malls had to increasingly offer rent discounts to attract tenants and maintain high occupancy.
• Premier projects proactively adjusted their brand portfolios and harnessed operational capabilities to enhance retailer revenues, ultimately driving an increase in the overall rental income.

Outlook: Leasing market confidence is expected to gradually recover

• Subsidies and trade-in incentives have been strengthened, anticipating substantial growth in the consumption of related sectors. Plus, daily consumption will remain a key driver of leasing demand, and experience-based consumption is poised for continuous growth.
• We expect the new supply to exceed 0.7 million sqm in the next 12 months. As retailers are currently adopting a cautious expansion strategy, the citywide vacancy rate is forecast to rise, while rents may decline correspondingly.