Summer consumption prompts short-term leasing demand pickup

• The increased consumer footfall this summer supported leasing market activity earlier in the quarter, especially in daily consumption-related businesses. F&B remained the most active subsector and accounted for over 40% of the new area leased.
• Besides that, most new leases were by affordable fashion, sportswear and electronic goods, particularly in the Urban submarket. Thus, net absorption volume grew significantly from the low base in Q2 2024.

Vacancy declines in both Urban and Suburban markets

• The Suburban vacancy rate declined by around 1.0 ppt to 2.8%, mainly due to new leases by a large supermarket, some household stores and affordable restaurants.
• The Urban vacancy rate also saw a drop by 0.6 ppts to 5.5%. Some shopping malls located in Yuexiu and Haizhu Districts managed to fill large vacancies with new tenants from the F&B sector, especially with local cuisines.

Retail rents continue the downward trend

• Since the improvement in consumption during the summer season was below expectations, overall demand remained cautious, weighing on market rental performance. For most remaining projects, landlords continued to lower rents to secure occupancy.
• Certain core urban projects benefitted from visitors during the summer season, thus sustaining their rent levels. Therefore, Urban and Suburban rents fell by 0.9% and 1.8% q-o-q on a chainlinked basis, respectively.

Outlook: Policies are expected to support consumer confidence

• The government introduced several policies in September and October, including a package of monetary policies and measures to stabilise the labour market. This should help bring a brighter consumption outlook and boost retailer confidence.
• It may still take more time for the retail market to adapt to cost-effective consumption patterns, suggesting a longer recovery time for market rental performance. When considering the limited supply in the coming 12 months, the rent decline may narrow.