Asia Pacific Retail Spotlight
Head to Savills Research and explore the factors that made retail markets in Asia Pacific so resilient in the first half of 2023, as well as the fundamentals that are expected to drive the sector in the coming years.
In its August Asia Pacific Retail Spotlight, Savills explores the trends and performance of key retail markets in 1H/2023, from India to Japan. Examining what the new normal emerging around the region looks like, the report asks why each market is currently rebounding at its own pace. Though tourist arrivals are trending up across APAC, high interest rates, persistent inflation and murky economic forecasts are impacting consumer confidence and pushing retail sales down. Despite macroeconomics, APAC retail markets are trending up, and long-term growth drivers remain robust.
Navigating the Post-Pandemic Retail Landscape
Will prime retail markets rebound to pre-pandemic growth patterns, or is a new normal coming? That’s the key question for retail markets across APAC after rents bottomed out in 2H/2022. The global retail sector faces considerable and ongoing challenges, but APAC remains the bright light. Pricing pressures continue, GDP growth is moderating, and consumers are cautious. Nonetheless, stable domestic consumption, the return of travel and limited prime stock availability supported modest rental growth in 1H/2023.
Waiting for a Full Tourism Recovery
It will most likely be 2024 before tourism recovers fully and returns to pre-pandemic levels. International arrivals soared by 306% y-o-y and are forecast to reach 84% of 2019 levels in 2024. However, destinations reliant on Chinese travellers, such as Hong Kong and Taiwan, will continue to wait. Thailand and Japan benefitted from depreciating currencies that were able to offset travel costs to some degree. It made each an attractive destination and spurred both to record 60% of pre-pandemic arrivals. Retail markets got a windfall from price-sensitive local travellers. In China and India domestic travel volumes have already exceeded 2019 volumes and made up for shortfalls in international arrivals.
Domestic Consumption Buoys Markets in the Short Term
Despite consumption growth slowing down in most of APAC in 1H/2023, the region has proven more resilient than others. Retail rents trended up in the first half of 2023. There are some supply pressures in Tier-1 Chinese cities and Hong Kong, but new supply is projected to reach 9.5 million sq m through 2025. The majority of prime APAC shopping centres are positioned to see up to 5% growth this year.
Fundamental Long Term Drivers Remaking APAC Retail
The worst is behind APAC’s prime retail real estate. While China wrestles with economic challenges and regional risks remain, APAC’s fundamentals will support future growth. Work from home mandate are being phased out. E-commerce penetration is climbing and ASEAN markets are digitalising rapidly. Environmental, social, and governance (ESG) mandates have emerged as crucial differentiators for retailers and key to consumer decisions. Landlords and retailers need to remain flexible, agile and responsive. If they do, the retail landscape will be a lush one going forward, in whatever form it takes.
For complete details, read the August 2023 Asia Pacific Retail Spotlight at Savills Research:
