Retail revenue less than expected; consumer spending slows

• By November, the total sales of consumer goods increased by 6.7% y-o-y, but offline sales grew at a slower pace than online sales. Leasing demand was moderate during the quarter, as retailers remained cautious about store expansions amid a lack of sustained sales momentum. 
• F&B tenants slowed their expansions. Chain F&B brands actively adjusted their brand hierarchy to respond to changes in consumer trends. The market witnessed the opening of some beauty and fashion brands’ first stores. For example, skincare brand EVE LOM and designer brand Mardi Mercredi opened their first Guangzhou stores at Parc Central.

Three new projects launch with high opening rates

• Three shopping malls, Beijing Road Teemall Phase II in Yuexiu and Fun City and COCO Park (Nansha) in Nansha, opened in 4Q23, with a total GFA of approximately 236,000 sqm. Accordingly, the total stock expanded by 8.0% y-o-y by the end of the year. Benefitting from the high opening rates of the new projects, Guangzhou’s overall vacancy rate fell by 1.2 ppts q-o-q.
• Beijing Road Teemall Phase II targeted young consumers and injected new momentum into the traditional submarket. Fun City and COCO Park (Nansha) introduced several entertainment and children’s brands to attract families from the surrounding areas. The projects further enhanced the maturity of Nansha’s retail market.

Downward trend in rents continues

• Rents in the Urban and Suburban markets fell by 0.5% q-o-q and 1.4% q-o-q, respectively. Most retailers remained sensitive to operational costs, prompting landlords to adopt more flexible strategies to fill vacancies, including rent reductions and extended rent-free periods.
• Investors were still actively looking for investment opportunities in the retail market, which is expected to stay on a recovery trajectory in the long term. However, they are becoming more thoughtful about their purchases, looking for higher investment yields.

Outlook: Market to be confronted with opportunity and challenge

• We expect only one project to launch in Guangzhou in 2024, adding a total of 116,000 sqm of new supply. Although supply remains low, consumer spending may propel leasing demand at a softer pace in the short term. Existing projects with greater destocking pressure are predicted to see a downward trend in rents.
• Facing the increasingly competitive stock market, in addition to optimising brand and format mix, projects need to pay more attention to innovating the operation model and improving overall competitiveness with better services.