New brands continue to emerge and thrive amid the value-driven consumption wave

• As consumption turned rational, value-for-money F&B brands led citywide expansion. However, this rational mindset did not eliminate emotional spending. International sportswear remained resilient, sustained by consumer demand for identity and emotional resonance.
• Faced with these shifting definitions of value, traditional brands accelerated their transformation, leveraging store upgrades and new sub-brand launches to stay competitive.

Urban projects outpace suburbs in vacancy backfilling

• Benchmark projects focused primarily on optimizing their tenant mix, with most urban projects successfully absorbing vacant space through active brand expansions. In the quarter, the urban vacancy rate edged down by 0.1 ppt q-o-q.
• Meanwhile, multiple suburban projects could hardly replace departing tenants, including supermarkets and local brands, leading to a 0.8 ppt increase q-o-q in the suburban vacancy rate.

Rents show further divergence across projects

• Premium brands continued to prioritize landmark projects with high visibility and footfall for expansion. Consequently, overall rents for these prime assets remained stable, with certain prime units even recording modest gains.
• Conversely, non-core projects faced absorption pressure following the departure of traditional retailers, prompting landlords to offer rent concessions or introduce entertainment tenants with lower affordability.

Outlook: Complete restoration of consumer confidence will take time

• Looking ahead, the gradual recovery of consumer confidence will drive brand expansion. Brands focusing on value-for-money and emotional value are likely to lead the expansion, radiating from prime hubs into broader submarkets.
• Over the next 12 months, Shenzhen is expected to welcome approximately 370,000 sqm of new supply, a significant decline from previous years. While a modest increase in supply cushions competition for existing projects, a meaningful rental recovery will still take time.