Soft demand persists despite modest recovery in macro consumption

• In Jan-Feb 2026, Beijing’s total retail sales saw a narrowed y-o-y decline of 0.3% compared to 2025, with catering revenue growth turning positive. However, overall leasing momentum remained subdued, reflecting cautious consumer sentiment.
• While traditional retail slowed, niche segments like outdoor sports and wellness remained resilient. Tech’s rise is reshaping retail spaces, with smart products expanding offline. Unitree Robotics opened at Yintai In88 in Wangfujing in the quarter.

New supply pauses in Q1 2026

• No new projects were launched in Q1 2026, creating a window to absorb existing stock. Steady net absorption reduced urban and suburban vacancy rates by 0.2 ppts and 0.4 ppts to 7.0% and 9.7%, respectively.
• Three projects are scheduled for delivery in 2026, totalling 229,800 sqm of new space. All upcoming supply will be in the suburban market.

Core market rental decline faster in Q1 2026

• Rental declined deepened on a q-o-q basis in the quarter, with core areas hardest hit (-3.4%), followed by urban (-3.0%) and suburban (-2.5%), signalling a shift in pressure from suburban areas to the core market.
• Landlords now find it increasingly challenging to sustain stable rents, high occupancy and premium positioning, making strategic trade-offs inevitable.

Outlook: Subdued demand contrasts with tech brands’ offline push

• The market is expected to see ongoing rental softness, driven by sustained weakness in tenant demand. However, in the investment market, retail assets will draw continued interest, supported by relatively stable cash flows.
• The accelerating pace of technological transformation is redefining the retail landscape, as AI-powered, digitally integrated spaces and the offline expansion of smart tech products reshape the retail ecosystem.