By: Anshuman Magazine, CMD, CBRE South Asia
Track2Realty: Despite overall retailer demand remaining generally subdued for retail real estate space in the Asia Pacific region during the July–September period of the year (Q3 2014)—major global mass market fashion brands continued with steady space transactions in India and emerging markets of Southeast Asia.
A few other Asian marketplaces such as Hong Kong and Singapore, however, saw stagnant consumer spends and high operating costs discouraging retailers from expanding their footprints in the region during the period.
Food and beverage (F&B) retailers, especially cafés and quick service restaurants, helped to drive leasing activity in almost every Asian market; while luxury brands remained relatively quiet during the review period, focusing on strengthening their brand presence through larger flagship outlets across the region.
Mass market brands, meanwhile, are expected to seekhighlypopulated markets for expansion in 2015. The overall volume of retail space transactions next year will most likely be concentrated in India and China, with India anticipated to see demand pick-up in forthcoming quarters.
India retail real estate trends: Q3 2014
Retailer demand in India improved in Q3 2014, and the period saw steady leasing activity. Consumer sentiment continued to progressively strengthen on the back of a stable central government, and gradually improving economic indicators.The shortage of space in high quality shopping centers remained a key barrier, however, especially for tier II locations.
Among the leading cities of the country, New Delhi recorded steady transaction activity from overseas F&B retails; while high streets continued to see limited activity since brands preferred mall locations. Mumbai also saw greater activity from both domestic and global brands in the F&B segment; as did large southern cities of Tamil Nadu and Kerala, which attracted demand from fashion apparel and hypermarkets as well.
Northern tier II and III towns saw steady demand from retailers for new store outlets during the period too. Rising demand for retail real estate, along with the lack of quality space in Mumbai is likely to result in rental value growth, going forward.
European and US brands—especially from F&B, hypermarket, and mid-range fashion apparel segments—seem most likely to enter/expand their retail footprints in India in forthcoming months. Domestic brands, meanwhile, continued to expand across tier II and III locations during Q3 2014.
The period also saw large domestic shopping centers and retailers increasingly develop their e-Commerce platforms; while major local retailers used them to test smaller markets before investing in brick-and-mortar stores in such locations.This strategy of test marketing consumer trends through online stores was also noted among global brands planning to set up shop in India.
New organized retail estate supply has been observed to be gradually shifting from tier I to tier II locations, with approximately 50–60% of the current pipeline lying outside the major three cities of the Delhi National Capital Region, Mumbai and Bangalore.
Nevertheless, India continues to be perceived as an attractive and preferred emerging marketplace by international retailers. Activity from new global entrants is expected to pick-up in 2015.
