The retail landscape in the Asia Pacific region continues to show signs of recovery, albeit at an uneven pace. Overall retail sales growth remains resilient, with strong growth recorded in developing markets such as India and ASEAN countries, where a growing middle class and increasing urbanisation are helping to drive consumer spending.

International tourism is also providing a welcome boost to retail activity. For the first seven months of 2024, international tourist arrivals in Asia Pacific were just 18% below the pre-pandemic peak recorded in 2019, with a full recovery expected by 2025. Japan has emerged as a standout performer, surpassing 2019 tourist numbers by 10% during the first three quarters, while markets like South Korea, Malaysia, and Singapore are also seeing strong growth. This resurgence is helping to boost retail sales, especially in luxury markets, as tourists take advantage of weakened local currencies.

However, the recovery is not without its challenges, particularly in the Greater China area. Concerns regarding slowing growth and high debt levels are dampening sentiment, prompting mainland Chinese consumers, one of the biggest shoppers in the region, to exercise more caution buying luxuries and spending overseas.

Luxury retailers, in response, are shifting their strategies from active expansion to consolidating networks and focusing on creating immersive, experience-driven environments to engage affluent customers beyond traditional shopping. Pop-up stores, high-profile exhibitions, and experiential marketing events have become key tools for luxury brands to maintain their presence and build brand awareness.

This shift towards experiential retail is part of a broader trend where the customer experience is becoming just as important as the product itself, particularly among younger generations. Lifestyle retailers, including MINISO and Pop Mart, are capitalising on this trend and aggressively expanding across the region, particularly in Southeast Asia markets.

Meanwhile, athleisure and fitness brands such as Lululemon, Vuori, ON Running, Hoka and Salomon are seeing strong leasing demand as the region’s focus on health and wellness continues to grow. As such, the market has seen notable deals such as Vuori’s debut in Shanghai and ON Running’s first store in Hong Kong taking place in 2H/2024.

On the other hand, Chinese retailers are increasingly looking abroad for growth opportunities as domestic sales slow. Food and beverage brands, particularly bubble tea and casual dining chains, are expanding into markets with large Chinese communities or similar cultural tastes. Other trades such as automotives, consumer electronics, and cosmetics are also looking to go global. Electric vehicle brands like BYD, AION, and NIO are making significant investments in South and Southeast Asia to diversify their operations and mitigate risks associated with trade tensions and rising tariffs.

Looking ahead, prime retail rents in most Asia Pacific markets are expected to see a modest increase of 0% to 5% in 2025, while cities like Tokyo, Bangkok, and Kuala Lumpur may experience a 10% upside. Conversely, tier-1 cities in mainland China, along with Hong Kong and Macau, could face near-term corrections of 5% to 10%. Despite macroeconomic uncertainties, Asia Pacific’s retail markets still offer exciting growth prospects, particularly in emerging markets. In more mature markets, we expect retailers to focus on enhancing the shopping experience, integrating lifestyle elements, and exploring non-traditional store formats.

Further reading:
Asia Pacific Retail Spotlight Dec 2024

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Nick Bradstreet