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F&B continues to nurture demand in APAC retail leasing

In a sign of sustained recovery, Asia Pacific’s retail leasing landscape has maintained a gradual uptrend for the fourth consecutive quarter, according to a recent report by real estate firm JLL. 

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The strength observed in certain parts of the region can be attributed to the ongoing recovery in tourism, which has significantly boosted foot traffic and spurred the opening of new retail establishments. 

The retail sector is also coping with consumers trending toward more experiential spending.

While economic uncertainties across the region threaten a positive trajectory, leasing activity remains robust, particularly in the food & beverage, entertainment, and fashion sectors. 

According to JLL, outlook for the retail market is cautiously optimistic, supported by stable consumer confidence and an ongoing increase in international tourism.

Inside Ralph’s Coffee in Singapore, a leading brand in fashion-turned-F&B retailers popping up in Asia. Source: Ralph Lauren

F&B, experiential segments continue to drive demand

One notable aspect of APAC’s retail rental recovery is the strong demand for experience-oriented tenants, as well as those within the food and beverage (F&B) segment.

Among other notable openings in the region, Jakarta saw the opening of the first-ever Coach restaurant at Grand Indonesia West Mall in March.

In Hong Kong, Roman chain Alice Pizza, brought into Asia by Bluebell Group, extended its footprint with a second branch in Lyndhurst Terrace in Central in May (pictured below), following its first store opening in Wan Chai in 2023. 

Source: Alice Pizza

Consumers are also increasingly seeking immersive experiences when they visit retail spaces, and this shift in preference has spurred a surge in demand for tenants that offer engaging experiences.

The rise of experience-oriented tenants aligns with the evolving dynamics of the retail landscape, as traditional brick-and-mortar stores and shopping malls adapt to changing consumer behaviours. 

The JLL report anticipates that this trend will persist, with F&B outlets continuing to be highly sought after by both consumers and landlords, particularly in the Greater China and Southeast Asia markets. 

Bangkok sees record-high international leasing activity

Bangkok experienced a remarkable strength in demand from international retailers, particularly in its central business district (CBA), where the entry of top-of-the-market supply in 2023 complemented this trend. 

During the first quarter of 2024, three prime retail centres were added, encompassing a total area of 44,200 square metres. Erawan Bangkok and Gaysorn Amarin now house luxury-segment tenants, while EmSphere has introduced entertainment venues in its remaining portion. 

Looking ahead, significant new supply and upcoming renovation plans are expected to shape the market by the end of 2024. Positive retail sentiment and footfall in the region are anticipated to facilitate the gradual occupation of vacant spaces by tenants.

Retail rents in Singapore remain on ‘growth path’ 

Retailers in Singapore maintain confidence in the market, with operators adopting a long-term perspective and continuing their expansion efforts. 

Leasing demand during the first quarter was primarily driven by F&B vendors, active lifestyle and sports-related operations, and beauty and wellness brands.

Steady domestic consumption and a favourable outlook for tourism, encompassing both business and leisure travel, are poised to attract new brands and drive the strategic expansion of existing ones in Singapore. 

Mainland Chinese tourists are returning to Hong Kong, but spending less than they used to, instead visiting photogenic spots across Hong Kong such as the Kennedy Town promenade. Source: Shutterstock

Sluggish consumption in Hong Kong and Shanghai continue to strain recovery

Hong Kong’s retail sales witnessed a significant decline in the first quarter, thanks to dwindling domestic consumption that has been amplified by both a surge in outbound travel and a softening in tourist spending per capita. 

Despite this challenging retail landscape, leasing demand remained stable, with a focus on the mass-to-mid-end market. Notably, establishments such as drug and dispensary shops, jewellery stores, and light refreshment outlets attracted leasing interest. Operators from mainland China have also continued to expand their presence in the market, as more mainland Chinese tourists restart visits to Hong Kong.

On the other hand, Hongkongers’ weekend visits to Shenzhen are paying off for the latter, as some retailers now look to expand their presence in Shenzhen. Hermes, for example, added 1,000 square metres to its existing lease in The MixC, as did Gentle Monster, which is building a multi-storey Haus Nowhere store in MixC World. 

Meanwhile in Beijing, a pick-up in consumption supported firmer leasing demand, particularly in the mass-to-mid-end market. Store openings encompassed a diverse range of categories, including F&B, fashion, lifestyle, and new energy vehicles.

In Guangzhou, footfall at shopping malls increased during shopping festivals; however, sales revenue growth remained sluggish. Again in Guangzhou, the F&B sector exhibited healthy sales, supporting demand from domestic F&B chains and leading to a majority of new store openings in the quarter. 

Seoul has been a tourism hotspot, along with Japan. Source: Shutterstock

Strong tourism rebound fuels high streets in North Asia

Tokyo’s prime high streets continue to attract international retailers, thanks to the steady influx of foreign visitors.

Hoka recently opened a store at the intersection of Omotesando and Meiji-dori, while Balenciaga opened a new outlet on Ginza Chuo-dori in May.

In 2023, despite tourism reaching only 79 percent of 2019 levels, spending by these visitors surpassed JPY 5 trillion for the first time. This record-breaking spending boom has served as a counterbalance to the softness in domestic consumption. 

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In South Korea, consumer sentiment and retail sales performances have exhibited a mixed signals since the beginning of 2024.

As in the case of Japan, inbound tourism has helped bolster the market’s retail leasing sentiment. Heavily trafficked shopping districts such as Myeongdong, which offer unique experiences, have reaped the most benefits from the upswing in foreign tourists, resulting in a decline in vacant shops.