China retail shifts to omnichannel as store expansion moderates in lower-tier cities

Leasing sentiment is improving in tier I cities.

Retailers in mainland China are increasingly adopting omnichannel strategies, using digital platforms to reach consumers outside their core store catchments, according to CBRE's Asia Pacific Retail Trends Q1 2026.

This shift is reducing the need for aggressive physical expansion in lower-tier cities, as brands optimise store networks and focus on high-efficiency locations.

Leasing sentiment is showing clear improvement in tier I cities, supported by expansion from both domestic and international retailers. Elevated geopolitical uncertainty in the Middle East has encouraged some global brands to accelerate China-focused strategies, whilst the recovery in international tourism is providing additional support to retail demand.

Prime retail assets in core urban locations continue to maintain high occupancy levels. In contrast, suburban areas and lower-tier cities are facing pressure from ongoing supply additions, which is weighing on rents and vacancy rates.

New-to-market activity remains robust, particularly across cosmetics, fragrance, fashion, athleisure, and lifestyle segments.

Overseas retailers continue to prioritise tier I cities, with Shanghai emerging as the preferred destination for first-store openings.

However, luxury brands are moderating expansion, shifting focus toward portfolio optimisation and consolidation, especially outside top-tier markets.

A major trend shaping the market is the rise of experience-driven retail. Brands are investing in immersive store designs, interactive consumer experiences, and in-store activations to strengthen engagement.

Consumers are increasingly favouring specialist retailers with clear category positioning, reinforcing the shift toward curated, concept-led stores.

Local Chinese brands are showing greater willingness than international players to experiment with non-traditional locations and complex store formats, even in environments with stricter regulatory requirements.

At the same time, open-air and lifestyle-oriented retail spaces are gaining popularity. This growth is being supported by changing consumer preferences and government-led initiatives aimed at converting older residential zones into mixed-use commercial districts.

“Assets that accommodate diverse concepts, innovative formats, and experience driven retail will be best positioned to capture demand in a highly competitive environment,” the report said. “Retailers and developers should stay attuned to local consumer preferences and cultural nuances, adopting more localised store concepts rather than replicating global templates