The retail leasing situation in the Asia-Pacific is expected to improve next year, driven by a clear demand for space expansion among retailers. Thai retailers are showing positive movement in terms of opening new stores and branch expansion strategies in 2022.

Ms. Jariya Tamtrongkijkul, Head of Retail Space Department at CBRE Thailand, commented, "Many leading project developers and brands in Thailand are focusing more on creating experiences and interactions with customers than ever before. Experiential retail is crucial for both retail space developers and tenants in developing projects with physical or hybrid storefronts. The formats of shopping malls and stores in the future will be adapted to accommodate changing consumer behaviors. Additionally, CBRE has observed positive movements from retailers regarding branch expansion strategies in 2022. However, expansion will still be based on carefully considered measures such as location, financial indicators, and brand expansion strategies resulting from the policy of reopening the country in November."

CBRE conducted a survey of over 150 retailers across various industries in the region and found that the majority (65%) want to expand with physical stores. The most evident demand comes from China and India, where over 90% of retailers are looking for space to expand in prime locations within city-center malls and main shopping streets, which remain highly sought after as retailers seek quality spaces amid stable rental conditions and a shortage of available space in these locations.

Moreover, the expansion of retailers will primarily be domestic due to the ongoing impact of new waves of COVID-19, which continue to restrict international business travel and site visits necessary for overseas expansion. Various requirements to control the pandemic have led retailers to expect a sales recovery to be pushed back another 6-12 months. Currently, only 10% of CBRE survey respondents report that sales have returned to pre-pandemic levels.

However, retailers remain optimistic about recovery in 2022, anticipating a gradual return to travel. The survey also revealed that nearly 75% of retailers expect sales to improve moderately or significantly compared to 2021. To prepare for the next growth cycle, many retailers are seizing this opportunity to secure better leasing terms.

"As the retail leasing market remains tenant-driven, agile retailers can negotiate and secure better locations or rental rates. At the same time, retailers can also incorporate more flexibility and protections into new lease agreements," Ms. Jariya added.

Retailers' long-term outlook on storefronts is divided into two groups: one group believes the demand for physical stores will decline, while an equal proportion believes the demand will persist. In the future, physical stores will play a more significant role in logistics networks to deliver products to customers alongside the integration of e-commerce. Approximately 70% of respondents view online ordering with in-store pickup (Click and Collect) as becoming standard, and online orders will increasingly be managed and fulfilled from physical stores.

Download the report here: Asia Pacific Retail Flash Survey 2021