Local retail sales see solid start amid seasonal lull in leasing

• Retail sales in Guangzhou posted solid growth at the beginning of the year, led by online consumption and holiday spending. While this helped boost dining revenue, traditional retail sectors saw limited gains.
• Leasing demand in shopping centres entered a seasonal lull, while sportswear, F&B and leisure entertainment remained the most active subsectors. Some core projects upgraded their fashion mixes with luxury jewellery and high-end leisurewear.

Urban vacancy edges down, while suburban vacancy remains stable

• The vacancy rate in Guangzhou’s urban submarket recorded a slight decrease to 7.1% during the quarter. This was mainly driven by a project that debuted with low occupancy in the previous quarter but saw a significant ramp-up in leasing activity this period.
• Suburban vacancy remained broadly stable at 4.5%, as leasing strategies focused on backfilling vacant space with large-format tenants, particularly in the leisure and entertainment and home furnishing sectors.

Leasing pressure persists despite the rate of decline narrowing

• Rental momentum remained weak as unstable sales performance limited recovery. Rents in the urban and suburban markets declined by 1.2% and 1.8% q-o-q respectively. However, performance diverged across projects.
• While core projects with limited vacancy achieved mild growth through step-up leases, most landlords had to offer rental concessions to attract new tenants. Consequently, rental declines were most pronounced in projects with frequent tenant turnover.

Outlook: Policy incentives and new market demand to fuel leasing momentum

• Looking ahead, the 15th Five-Year Plan prioritises consumption as a key driver of economic growth. A series of supportive policies have been introduced to cultivate new growth drivers in service consumption, such as cultural tourism, sporting events and wellness.
• This is expected to bolster leasing momentum across the F&B, sportswear and lifestyle sectors. Meanwhile, a robust pipeline of high-quality projects will provide retailers with expanded options for growth within the Guangzhou retail market.