The retail landscape across the region is expected to remain diverse and dependent on the market, geographical location and retail sector. Structurally, ongoing growth in E-commerce will continue as more retailers expand their online platforms. While E-commerce in the Chinese mainland is globally leading, penetration rates across many other markets in Asia Pacific remains comparatively low by global standards and so has potential to lift further.
In the near term, assets focusing on non-discretionary expenditure are likely to outperform as households continue to focus on cost of living issues. Accordingly, neighbourhood shopping centres, especially those with strong catchment fundamentals and positive rental reversion, will be targeted by investors. In some markets, such as Australia, yields have already started to moderately recompress, reversing trends evident over the past several years.
The luxury retail is forecast to perform strongly. The sector has several underlying drivers supporting growth. These include favourable demographic tailwinds of increasing population size and rising middle class wealth. In addition, tourism continues to recover, with softer local currencies supporting inbound international tourism from other regions. These trends together with comparatively low vacancy levels should support prime high street rent growth, not least as Asia Pacific markets remain favourably priced compared to other global, super prime retail streets.
