Retail leasing activity in APAC markets to pick up next year: CBRE survey

Retail leasing activity in APAC markets to pick up next year: CBRE survey

Retail leasing activity in Asia Pacific markets is expected to pick up next year amid solid expansion demand from retailers.

According to a CBRE survey of more than 150 retailers across industries in the region, a majority (65%) want to expand their physical store network, with demand most pronounced in China and India, where more than 90% are eyeing more stores.

Prime locations in city centre shopping malls and high streets will remain keenly sought-after, as retailers pursue a flight to quality against the backdrop of stabilising rents and scarcity of available space in these locations.

Retailers’ expansion will also be largely domestic as new COVID-19 infection waves continue to constrain international business travel and the site inspections necessary for cross-border expansion.

Restrictions to contain the infection waves have caused retailers to push back their expectations of a sales recovery by 6-12 more months. Currently, just 10% of CBRE’s survey respondents report sales volumes back at pre-pandemic levels.

Asia pacific CBRE Retail Survey

Nevertheless, retailers remain optimistic for a turnaround in 2022 as travel is expected to gradually resume. Nearly 75% of retailers surveyed expect sales performance to improve either moderately or significantly from 2021. In preparation for this next growth cycle, many retailers are taking the opportunity to secure favourable lease terms.

“The retail leasing market continues to favour tenants, retailers that act quickly can renegotiate and secure better locations or rental rates. At the same time, they can also incorporate more flexibility and protection into new leases,” said Ada Choi, CBRE’s Head of Occupier Research & Head of Data Intelligence and Management, APAC.

Asia Pacific retail market

Retailers are divided about the long-term prospects for the physical store, with-one- seeing decreased demand and the same percentage seeing continued demand. Brick-and-mortar establishments going forward will play a greater role in last-mile delivery networks in tandem with e-commerce adoption, with approximately 70% seeing click-and-collect service becoming a regular offering and more online orders fulfilled and delivered from physical stores.

Vivek Kaul, CBRE’s Head of Retail, Advisory & Transaction Services, Asia, added, “Asia Pacific retailers are optimistic about the sales outlook for 2022. This takes place against the backdrop of the evolving role of physical stores, where retailers are expanding product display areas and showrooms to enhance the in-store consumer experience. To cater to changing consumption patterns from omnichannel retail, landlords should also consider partnering with tenants or on-demand delivery apps to offer in-mall
pick up of purchases at service counters or on-demand delivery from shopping centres.”

Click the following link to download the report: Asia Pacific Retail Flash Survey 2021