Modest consumption growth provides little boost to leasing demand

• Retailers’ enthusiasm for expansion faced headwinds of the growing consumer preference for value-driven shopping experiences. Meanwhile, new leases increasingly favoured F&B and entertainment uses, driven by evolving consumption trends.
• In goods retail, emerging subsectors remained active, with sportswear accounting for one-third of new apparel leased areas. Budget stores such as MINISO also strengthened their market presence by opening flagship stores in key locations.

One new suburban project enters the market

• Most urban projects reached high occupancy ahead of year-end, in some cases by committing more service-oriented tenants and lowering brand quality. However, the opening of a new urban project, combined with anchor tenants repositioning in a few properties, contributed to a 1.4 ppts increase in the urban vacancy rate.
• Meanwhile, a new suburban project was launched but reported slower than expected leasing take-up. As existing suburban assets maintaining high occupancy levels, the overall suburban vacancy rate remained stable.

Rental decline persists amid the market adjustment

• Soft sales and operational challenges kept rental performance under pressure. In particular, some landlords facing year-end expiries actively reduced rents and even eased fit-out requirements to foster re-leasing.
• Zengcheng Wanda Plaza was acquired by Hony Capital, reflecting investor held interest in retail asset that offering stable performance and a compelling entry price. Nonetheless, broader sentiment remained cautious amid falling rents, and yield decompression persisted.

Outlook: Retail market conditions to see a gradual improvement in the near term

• The government has introduced a new trade in scheme, with greater focus on long-term sustainability in consumption. Subsidies are now targeted at smart products, including Grade-1 energy-efficient home appliances and new products like smart glasses.
• This initiative aims to restructure production systems and stimulate demand for high-quality, sustainable consumption. With market fundamentals remaining supportive, retail asset performance is expected to gradually improve.