Retailers remain cautious about expansion

• The accumulated total retail sales y-o-y growth slowed from 4.3% in March to 1.8% in May. Consumers reduced their spending, making for a slow recovery in the retail market.
• F&B continued to be the main market driver by contributing more than 30% of the new area leased in Q2 2024. Lifestyle followed with around 20% as grocery and electronics actively expanded.

Vacancy stays flat with no new completions

• No additional supply was observed. Despite projects reaching readiness, lagging leasing progress delayed some new malls from opening. One urban project was downgraded due to its poor tenant mix, reducing the total retail stock to 7.16 million sqm.
• The citywide average vacancy rate stayed at 2.9%. A few projects managed to fill up vacant spaces with large flagship stores, while most remaining projects saw varying rises in vacancy rates.

Rents perform diversely across projects

• Retailers generally tightened rental budgets to ensure liquidity in the challenging market. As a result, landlords offered rent concessions in light of the soft market sentiment, especially for projects with many vacant spaces. Overall rents dipped by 0.7% q-o-q on a chain-linked basis.
• Core projects in both the Urban and Suburban markets saw strong leasing demand due to high consumer traffic and satisfying sales performance. For these projects, rents were stable or even slightly increased despite the competition.

Outlook: Enhancing retail offerings to recover market sentiment

• We expect seven new projects, with around 0.7 million sqm in total, to enter the market in the next 12 months. It is likely to cause more competition and, thus, exert some pressure on the vacancy rate.
• Landlords are putting their strategic emphasis on engaging and retaining consumers by enhancing retail offerings amidst fierce competition. It may take some time before landlords can keep rents steady.