Retail in Asia

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Retailers bullish on brick-and-mortar expansion in Asia-Pacific

Over two-thirds of retail brokers reported a surge in leasing enquiries for new establishments, upgraded spaces, and expansion in March 2024, according to the latest Asia Pacific Retail Leasing Sentiment Survey conducted by real estate firm CBRE from February 26 to March 6, 2024.

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Across various markets including Korea, Singapore, India, Australia, Hong Kong, mainland China, and particularly Japan, positive retail leasing sentiment prevailed.

Japan witnessed remarkable progress, fuelled by increased profitability and a surge in tourist expenditure.

The survey also highlighted a contraction of vacancy rates in prime areas, resulting in a significant shift in dynamics favouring landlords.

Wanted: Prime real estate

Looking ahead to 2024, the majority of retailers have plans to maintain or expand their real estate budgets and store footprints.

They exhibit a strong preference for prime core retail spaces to bolster their presence in key locations, according to the survey.

The trend echoes recent activity by major luxury groups such as Kering and LVMH, which have been racing not just to lease, but to acquire, prime spots in some of the world’s most desirable shopping districts in Paris, New York, Milan and Tokyo.

Seoul’a Gangnam district. Source: Shutterstock

In Asia, Korea saw the strongest demand for core locations, particularly in areas such as Myeongdong and Gangnam, while in Greater China CBRE expects “a certain degree of consolidation” as retailers maintain caution.

Meanwhile in Australia, retailers preferred “quality” over location, which is expected to influence leasing activity in CBD high streets and regional malls in the next few months.

Shophouses in Singapore. Source: Shutterstock

As previously reported by CBRE in its APAC market outlook released in January 2024, retailers are also exploring “alternative space options” which are gaining cultural momentum, such as heritage buildings and up-and-coming neighbourhoods. Examples include Seongsu-dong in Seoul, where retailers’ pop-up stores have driven rents up by 100 percent in the last few years, traditional shophouses in Singapore, and revitalised historic buildings in mainland China.

Most active retail tenants: F&B and sportswear

F&B (Food and Beverage) continues to dominate the retail sector in the region, with Singapore and other Southeast Asia markets driving the highest demand. Coffee shops and casual dining restaurants are the top F&B concepts requiring new and expanded spaces.

Apart from Singapore, CBRE also noted that Hong Kong has seen an increase in new F&B entrants starting from late 2023, although some Hong Kong consumers have also begun to shift their spending to nearby Shenzhen, where hospitality and F&B, among other sectors, are seen as more affordable.

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CBRE reports that sportswear and apparel are currently the second and third most active sectors, respectively.

Overseas sports and athleisure brands are particularly interested in mainland China and India, said brokers.