F&B drives leasing demand

• The market slowed in Q2 2024 due to the lean consumption season. The y-o-y growth in accumulated retail sales of goods narrowed from 3.2% in March to 1.8% in May, and that in accumulated sales of lodging and catering also dropped from 7.0% to 3.9%.
• The F&B sector remained the most active subsector in terms of new lettings. The contribution of F&B to the new area leased increased from around 30% in Q1 2024 to over 50% in Q2, as demand from other sectors contracted.

Suburban vacancy dives with one asset downgraded

• Affordable restaurants and children’s fashion brands filled spaces in some Urban projects with high vacancy pressure. As a result, the Urban vacancy rate fell from 6.8% to 6.1% with no new completions.
• One submarket project with high vacancy and a subpar tenant mix was removed from the basket. Therefore, the Suburban vacancy rate declined to 3.8%, even though vacancies in other Suburban projects increased amid a less active demand sentiment.

Subdued retail sales continue to weigh on rents

• Rents declined across all submarkets. Urban rents decreased 0.8% q-o-q on a chain-linked basis. Most retailers turned even more conservative in face of the operational pressures. The softer demand exerted pressure on rents, even for core projects.
• As for the Suburban markets, rents declined 1.6% q-o-q on a chain-linked basis with fewer leasing requests.

Outlook: Holiday economy to support leasing activity

• An increase in tourism is expected during the summer holiday and other traditional holidays in the coming quarters. It may help boost consumption and leasing momentum.
• No new retail completions to be launched in the next 12 months, while market competition may persist with limited incremental growth in demand. Landlords are trying to achieve an attractive tenant mix and high occupancy to remain competitive.