Lease turnovers rise as suppressed consumer sentiment weighs on margins

• The overall consumer retail market is under sustained pressure in Q3, as F&B tenant turnover picks up pace amid the popularity of emotive consumption. From January to September, total retail sales fell by 5.1% y-o-y, a steeper decline than in the same period last year.
• Leasing demand from ACG and outdoor brands slowed, but average store performance maintained steady growth. The momentum from IP collaborations and fashion trends also propelled many brands to regain sales traction.

Minor uptick in vacancies as supply-side pressure moderates

• Zero projects were launched in the quarter. Removals and additions to existing stock are expected in Q4 2025, as Beijing’s retail landscape undergoes continued revamping, driven by a shifting retail business model and evolving value proposition.
• Performance divergence among projects increased in the quarter, as vacancy rates in poorly managed malls rose. Urban vacancy rates rose by 0.6 ppts to 7.1%, while suburban vacancy rates increased by 0.2 ppts to 10.5%.

Overall rents decline amid market adjustment

• Amid the market’s adjustment period, rent declines across the city deepened. Economic volatility dampened consumer confidence and restricted spending appetite, which pushed brands to exercise caution in expansion and budgeting.
• In Q3 2025, operators made greater rent concessions; effective rents in the urban market dropped by 3.5% q-o-q and 8.0% y-o-y. 

Outlook: Demand volatility and supply influx to drive further rent concessions

• Frequent turnovers and cautious expansion plans are expected to complicate lease negotiations and introduce higher uncertainty, leading to rent concessions as a likely compromise. As a result, urban rents are forecast to decline by 10.6% y-o-y in Q4 2025.
• An additional 617,000 sqm of new supply is expected in the next 12 months. The sustained supply side influx is expected to further elevate urban and suburban vacancies in 2026.