Retail’s rocky road in the region has been well documented as rents have been hit by e-commerce from 2018, followed by Covid from January 2020 and, once things were beginning to normalize, the Ukraine War (early 2022) and widespread interest rate hikes by Central Banks. The good news is that retail markets appear to have bottomed out even if recovery remains soft.

Our hopes of a ‘V’ have been replaced by more modest expectations of an ‘L’ but nonetheless, most markets saw some growth late last year with the exception of Seoul where oversupply and tepid demand took rents down. There are reasons to hope however, as economic growth begins to take hold, inflation trends down, supply capacity comes back on stream and demand revives. The IMF expects Asia-Pacific to contribute 60% to global growth in 2024.

Despite China’s woes, India and Southeast Asia are emerging as key growth drivers. China looks set for GDP growth rates of around 4% per annum out to 2030 according to Oxford Economics and headwinds include an overleveraged housing sector, rising land and labour costs, high unemployment (especially among the young) and the prospect of an increasingly protectionist world.

In better news, tourism continues to make a steady recovery in the region and is now around 90% of pre-Covid levels. Favourable visa policies, cheaper flights and returning growth should see retail sales lifted in India and Southeast Asia this year and next. Looking ahead, most of the region’s retail markets are either in a late downswing or early upswing in terms of rental cycles and further modest rent rises are expected in most markets this year with the exception of China where tough conditions are expected to persist.

If recent turbulence has been alarming, it is worth reminding ourselves of the ‘Asian Growth Story’ of youthful demographics, a rising middle class and rapid urbanization. A region of 2.5 billion consumers, 38% of the world total, and 9 of the top 20 of the world’s consumer markets still offers huge potential to retailers, landlords and consumers alike.

Further reading:
Singapore Retail Briefing

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Simon Smith