New wave of retailer expansion expected to materialize in 2015
Tuesday, December 16, 2014, 18:45 GMT+7
Key emerging markets in Southeast Asia, along with other markets in the Asia Pacific region, will benefit from a new wave of retailer expansion which is expected to be realized next year, according to a recent report by US-based CBRE Group Inc.
Big cities in the region, like Hanoi and Ho Chi Minh City in Vietnam, will be a strong area of focus due to the growing appetite for consumer goods and the relaxation of foreign investment regulations next year, according to “The New Age of the Asia Pacific Retail Market” report.
Major cities in Indonesia, Malaysia and the Philippines will be in the same boat with the construction of new high-quality shopping centers, which are providing more options for retailer expansion in these markets, said Jonathan Hsu, director at CBRE Research in the Asia Pacific region.
International retailers tend to expand to secondary cities in the region after establishing their presence in capital or first-tier cities, said Hsu.
In recent years, the Asia Pacific retail market has boomed on the back of strong economic growth, rapid urbanization and the emergence of a large and prosperous middle class population, said the report by the Los Angeles-headquartered firm.
As a result, Asia Pacific is now experiencing an upsurge of new retail construction to meet demand as international retailers flock to the region. The report reveals that Asia’s middle class is set to triple in size, from 525 million in 2009 to over 1.7 billion by 2020. It is forecasted that by 2020, China, India and Indonesia will all be in the top ten global markets for retail consumption demand. In order to take advantage of this expanding middle class, international retailers—predominantly fast fashion brands—are continuing to enter and expand in Asia Pacific at a rapid rate.
Regional trend
Overall retailer demand in Asia Pacific is set to remain subdued heading into 2015 but activity and demand levels will diverge across different markets.
Despite concerns over the slowdown in economic growth and retail sales, especially in China, there continues to be an increase in the number of new retailer entrants across the region. Hong Kong, Beijing and Shanghai have seen the strongest flow of new market entrants looking to capitalize on the China growth story.
Tokyo saw the strongest activity in 2013 and momentum has continued in 2014, particularly from luxury brands, which has underpinned strong rental growth this year.
In Southeast Asia, Singapore has been the main hotspot, whilst both Taipei and Seoul are among the most active markets globally for new retailer entrants.
“Japan and Australia are expected to remain upbeat, whilst activity in India should pick up on the back of relaxation of foreign direct investment in single and multi-brand retail,” said Jonathan Hsu.
“China, Hong Kong and Singapore will stay relatively quiet due to softening domestic consumption, in addition to Chinese shoppers’ weaker appetite for luxury goods.” In terms of retailer types, CBRE expects mass-market brands to look towards highly populated markets—primarily China and India—for expansion in 2015.
Retailers in the luxury sector will opt to focus on the mature markets of Japan, Singapore and Hong Kong, with China less of a priority due to the ongoing anti-corruption campaign.
Bridge brands will concentrate on slightly more mature markets, including Japan and South Korea.
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One man’s meat is another man’s poison There are challenges ahead for retailers, including rising operational costs, the rapid growth of e-commerce, and a more sophisticated and demanding consumer base, contributing to a more competitive market. “Retailers will have to implement higher standards of due diligence, competitor benchmarking and strategic planning as the retailing environment turns increasingly competitive,” said Sebastian Skiff, executive director of CBRE’s Retail Services. "Retailers are also putting a general focus on portfolio reviews and consolidation, although they’re continuing to display a strong interest for well-established properties and locations in markets with a proven track record,” he said. “The increased level of competition will be especially visible in the shopping center environment, where landlords will have to utilize a range of strategies in order to ensure they stay relevant and continue to attract shoppers and tenants,” he added. |
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