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Lower rents drive more luxury brands and high street retailers to enter Asia-Pacific

(Source: Retail in Asia | November 20, 2015)

Lower rents caused by weak retail sales and slowing in tourist numbers in China are driving more international luxury brands and high street retailers to march into Asia-Pacific, a new report of DTZ/Cushman & Wakefield said on Wednesday. High-profile international retailers are targeting Australia, New Zealand as well as Metro Manila, the report says.

“The outlook for Asia’s overall retail market is largely positive, with retail sales growth averaging 8.5 percent over the next five years. Rising tourist numbers are spurring robust and sustained retailer demand – albeit firmly focused on prime, well-located space,” said Theodore Knipfing, Head of Retail, Asia-Pacific at Cushman & Wakefield.

“Although the growth of e-commerce is notable across the region, physical stores will remain important although landlords will need to focus on improving the shopping environment and customer experience in order to compete for retailer demand,” he added.

The report forecasts that China will become the world’s largest retail market by 2018.
While physical retail in high streets and shopping centers remains popular, retail sales growth is slowing as attention turns to the fast growing e-commerce market, but domestic dominance in this sector makes it difficult for foreign e-tailers to grow online market share.

“A weaker economic outlook is causing uncertainty for the luxury market, with the sector also under the impact of government-led anti-corruption drives. On the other hand, the rise of the middle class is expected to drive rapid expansion of popular luxury brands,” the report points out.

It also identifies a new trend at shopping malls in China as they are embracing the concept of a one-stop lifestyle center and are increasing areas of recreational facilities in order to differentiate from the online shopping experience and bring further sources of revenue.

In Beijing, developers look to deliver a shopping destination instead of just providing retail space, thus increasingly including F&B and a children’s education sector. In Shanghai, retail owners are adopting new technology, such as shopping apps and free wifi, to promote “online to offline” shopping and to collect customer demographic information. Further, the opening of the Disney Resort in 2016 is expected to begin a boom period for child-oriented retailers.

Causeway Bay in Hong Kong maintained its position as the most expensive retail location in the Asia-Pacific region and second in the global rankings. However, there is downward pressure on rents on the back of weaker retail sales and the slowing in tourist arrivals. From a positive angle, rentals drop in some shop fronts in this area paved the way for a more tenant-friendly environment.

Growth in Taiwan’s prime retail market is driven by new international brands willing to pay top rents in streets with the highest footfall numbers and rising tourist spend. On the other hand, F&B retailers who cannot afford the premiums are increasingly seeking opportunities in department stores that offer the much needed footfall but at lower rents.

 

Read more: http://www.retailinasia.com/article/markets/asia-pacific/2015/11/lower-rents-drive-more-luxury-brands-and-high-street-retailers-

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