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Although the recovery of mainland Chinese consumer demand was weaker than expected in H1 2023, consumption in Asia Pacific remained relatively resilient on the back of the solid job market and the ongoing rebound of cross border tourism. Strong visitor arrivals fuelled leasing activity in tourist-oriented areas of markets such as Japan, Korea and Singapore.
Mid-year review
Consumer spending in the Greater China region will rebound after dipping in 2022. However, other markets will see weaker growth stemming from heightened global economic uncertainty and diminishing tailwinds from the post-pandemic re-opening.
Forecast made in January 2023
MAINLAND CHINESE CONSUMER RECOVERY
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Expansionary demand continued to strengthen in H1 2023 thanks to resilient upgrading activity and requirements from new-to-market retailers. However, the uncertain economic outlook and persistent labour shortage will prompt retailers to retain a disciplined approach towards store network planning.
Vacancies in core locations were gradually filled during the first six months of the year, with demand seen spilling over to secondary locations. Landlords remain keen to enhance their tenant mix, including by replacing underperforming trades. Despite the ongoing market recovery, landlords will remain accommodative to reputable tenants.
Mid-year review
While 71% of retailers plan to open more stores, retailers will remain prudent in extending their presence in new markets. Space in prime assets will remain keenly sought after while interest in secondary retail will strengthen.
Forecast made in January 2023
Office Attendance to Find New Equilibrium
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Most markets recorded mild rental growth in H1 2023, underpinned by prime assets in core locations. Retail leasing is set to remain resilient in H2 2023 as retailers retain an optimistic view towards the outlook for consumer spending.
Most markets in the region are forecasted to experience a modest rental recovery this year, with Hong Kong SAR, Tokyo (Ginza) and Singapore expected to be leaders. Cities in mainland China and Taiwan will remain laggards.
Mid-year review
Rents in all markets will return to growth in 2023 but increases will be mild. Retail units in city centres will outperform those in decentralised locations. The potential for rental upside will be more pronounced in mainland Chinese tourists’ preferred destinations, such as Hong Kong SAR and Tokyo.
Forecast made in January 2023
MILD RENTAL GROWTH
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