rojects into functional social hubs. E-commerce hasn’t dampened the demand for physical space but it has certainly altered the kind of business that gets done in that space. According to a retail leasing survey conducted by property brokerage firm CBRE in the Asia-Pacific region, retailers are still in “expansionary mode”. The survey tests leasing sentiment, an important bellwether of how optimistic retailers feel about business prospects and in particular the value they expect to derive from retail real estate. Sentiment, of course, is a fluffy term, but in this instance, it is measured by the number and type of leasing enquiries, including site inspections, received by retail brokers.  The survey splits up leasing activity primarily into new retail setups, expansions by existing retailers, existing store upgrades and store relocations. The April survey compiled data from 124 respondents in the first quarter. It found that the appetite for new store openings is still very strong, with more than three-quarters of respondents reporting an increase in enquiries and site inspections that point toward opening more retail space at new or existing locations. This represents a material increase compared to a year ago. Given that retail vacancy is generally trending down across the continent, the continued momentum in leasing enquiries and activity is likely to shift negotiating leverage more toward landlords, meaning upward pressure on rents will remain. There will, however, be exceptions, for example, in major Chinese cities where sentiment is weaker, vacancy is higher and tenants still hold more leverage. Regional variations That is the big picture but of course, there are significant regional variations. Leasing sentiment is particularly strong in Japan, Korea, Singapore and India, but weaker in China and Hong Kong. Much of the strength in leasing, particularly in Japan and Singapore, is being driven by surging tourism but extremely resilient domestic consumers are doing their bit too. Food and beverage is king Predictably, interest in new space is being fuelled by the food and beverage sector, particularly in Southeast Asia. After food and beverage, the next most interested retailers are from the sportswear, clothing and footwear, and beauty and cosmetics sectors. The leasing sentiment report from CBRE is being largely echoed by other sources across the region. Savills Research released its own report on retail activity in April, noting that regional variations in recovery from the pandemic were becoming apparent: in particular, tourism-sensitive markets such as Japan, Singapore and Thailand are recovering more strongly. This is driving a material increase in rents and total retailer occupancy costs. Rents are also rising significantly where there are constraints on prime space, such as Hanoi. Tourism still below pre-pandemic level Tourism across the region is still well below pre-pandemic levels, with the absence of Chinese travellers still weighing heavily on visitor numbers. This might well be an understatement: according to data cited by Savills, tourism arrivals from Mainland China are at less than 40 per cent of pre-pandemic levels in every Asian market except Hong Kong. Thailand and the Philippines are both scraping the bottom of the barrel, with arrivals from China at 20 per cent and 15 per cent of the pre-pandemic benchmark respectively. Governments in these tourism-heavy countries are going in hard on marketing themselves as international travel destinations, and have had some success in offsetting the lower numbers of Chinese visitors by luring travellers from other sources. However, travel costs are elevated, and the absolute numbers are not the only factor that goes into tourism spending: spending patterns differ across cultures and it so happens that the Chinese spend a lot when they go abroad. So the effects of their absence are large. But Chinese F&B chains are travelling well While Chinese tourists have largely stayed away, their retailers have been travelling well. Savills notes the expansion of Chinese food and beverage chains such as Luckin Coffee and Cotti Coffee. After food and beverage, Savills sees the most store expansion activity coming from athleisure and cosmetics, particularly multi-brand cosmetics retailers such as OliveYoung and Matsumoto Kiyoshi. For their part, luxury and fashion retailers are focused on building concept stores in highly selective locations. Significant expansions in their store networks are generally not on the radar. The outlook The regional divergence in leasing strength and negotiating leverage across Asia can be expected to drive differential rental and occupancy growth. Savills points to good dynamics for landlords in Singapore, Hanoi, Ho Chi Minh City, Bangkok and Taipei. Tenants hold the upper hand in China, Kuala Lumpur and Seoul. CBRE notes that aside from expansions, there is also significant interest among retailers in upgrading existing space and relocating stores, particularly to prime spaces in core locations. Hand in hand with this is a focus on giving customers a better experience with stores that are more fun to shop in. Experimentation with store formats and non-traditional shopping locations will continue, and we can expect to see a lot of pop-ups. The differential demand for space across retail categories signals further shifts in the allocation of mall space. The best operators have turned out to be very good at nudging their properties away from purely transactional venues to experiential and social ones, and this is helping to restore foot traffic to healthy levels. The quality of the mall experience has risen appreciably. Looking ahead to 2025, Savills expects rents to rise in the low-to-mid-single-digits, except in China where they will be under greater pressure as retailers consolidate and nagging macroeconomic challenges play themselves out.