UNCERTAIN OUTLOOK CLOUDS RETAIL REVIVAL

The global retail industry has faced immense challenges over the past three years and although market conditions have improved as the pandemic recedes, 2023 is shaping up to be another tough year due to the global economic slowdown, elevated interest rates and persistent inflationary pressure.

The good news is that Asia Pacific is a relatively bright spot globally, albeit growth is moderating. Real GDP is forecast to reach 4.3% YoY in 2023, driven by China’s reopening and resilience in India and ASEAN (Association of Southeast Asian Nations). Inflation should ease to 2.9% in 2023 as the supply chain crisis resolves and energy prices cool. Nonetheless, pricing pressure is still near decade-highs in major APAC economies like Australia and Singapore, limiting consumer purchasing power. As such, retail sales growth should slow in 2023 across the board, except for Japan, China, and Hong Kong SAR, which are benefitting from a low base effect.

The question arises - how will recovery progress across the region’s prime retail markets? will pre-pandemic growth patterns resume or will a new normal emerge?

In terms of rents, most prime Asia Pacific retail markets bottomed out in 2H/2022 after three years of declines and have since gained momentum in 1H/2023. Stable domestic consumption, returning tourists, and constrained prime property availability supported mild rental rebounds with rental movements ranging from 0.5% to 5.7%. 

Among regional markets, Hong Kong SAR (5.7%), Singapore (3.1%) and Taipei (2.6%) registering the highest rental growth. The exceptions were Chinese cities like Shenzhen and Guangzhou, where ample new supply and softening local demand weighed on rents.