Here’s what you should expect from the APAC retail property market in 2022

Deep-pocketed retail operators are likely to launch new expansion plans. 

Retail markets across Asia Pacific are expected to recover at varying speeds as the pandemic continues to evolve. 

As international visitors return, JLL expects consumer spending to slowly recover, and retail sales growth is expected to outpace the long-term average across many countries in the region. 

Here’s more from JLL:

Although sentiment is expected to improve, retailers will maintain a focus on operational resilience given the potential for further headwinds related to COVID-19 and, more recently, supply chain disruptions and inflation. Flexibility and agility will still be needed to navigate the evolving retail landscape with strengthening existing store performance and enhancing online capabilities remaining integral parts of retailer strategies. 

Nonetheless, various retailers, often well-capitalised operators, are likely to shift their attention further ahead and commit to new expansion plans. 

Rents set to stage a recovery 

Easing restrictions should help shore up consumer confidence and support the recovery in footfall at physical stores. While loosening border restrictions could also provide additional impetus as international business and leisure travel gradually resumes. 

Improving retailer sentiment in tandem with a stabilising vacancy environment is expected to set the stage for a recovery in rents in 2022, albeit at an uneven pace across markets and asset types.

The pivot towards prime shopping destinations and quality space in local neighbourhoods from retailers, coupled with an increasing importance for active management of assets, is likely to see well-located, high-quality assets operated by experienced landlords outperform. 

There is no “one size fits all” strategy for reinventing or repurposing retail properties, and intensified competitive pressures have made it paramount for landlords to be proactive with their strategies to keep their properties relevant. 

Further acceleration in demand for experience 

Due to the need for social distancing, COVID-19 has accelerated the growth of e-commerce across the region and globe, and consumers and businesses have increasingly learned to use the internet to conduct online transactions. This trend piles pressure on physical retail shops, landlords, and their retailers to reinvent themselves by incorporating more experiential elements into the retail experience to maintain footfall. 

Retailers will seek to adapt by pivoting to experiential retail both in-store and online, moving beyond omnichannel into an omni-experiential strategy. Those who successfully leverage technology to integrate the offline and online worlds into a seamless retail experience will stand out.

Mall owners are likely to continue adjusting their tenant mix to include more experience-based tenants, such as F&B and entertainment operators. 

Investors to remain selective over retail assets 

A less uncertain operating environment and improving rental outlook should help gradually restore investors’ confidence. 

Retail yields have softened in several markets and the relative level, compared to other core commercial sectors amid stiff competition for these assets, may entice more investors to explore retail opportunities. The defensive characteristics of neighbourhood centres may attract income-driven investors while opportunistic investors look for value-add or repurposing potential. 

That said, the scarcity of opportunities to acquire high-quality assets in urban centres across many Asian markets would likely attract healthy interest if a chance becomes available. 

Investors will nonetheless be mindful of the ever changing retail environment when assessing potential opportunities.