By: Anshuman Magazine, CMD, CBRE South Asia
Track2Realty: 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, CBRE’s latest report The New Age of the Asia Pacific Retail Market reveals. As a result, Asia Pacific is now experiencing an upsurge of new retail construction to meet demand as international retailers flock to the region.
According to the report, Asia’s middle class is set to triple from 525 million in 2009 to over 1.7 billion by 2020; while India is slated to be in the top 10 global markets for retail consumption demand by 2020.
To take advantage of this expanding middle class, international retailers—predominantly fast fashion brands—are continuing to enter and expand in the region, including in India. Despite concerns over the slowdown in economic growth and retail sales, there continues to be an increase in the number of new retailer entrants.
Retail real estate activity to continue in 2015
Overall retailer demand in the region is set to remain subdued heading into 2015, but transactionactivity and retail demand levels will diverge across different markets, with that in India likely to pick up on the back of relaxation of foreign direct investment in single and multi-brand retail.
Recent market trends indicate that international retailers tend to expand into secondary cities—such as Hyderabad, Pune, Jaipur, Chandigarh and Kochi, among others—after establishing their presence in the Delhi National Capital Region or the tier I citiesof Mumbai and Bangalore. The construction of new, high quality shopping center supply in such secondary locations, therefore, will provide more options to global retailers seeking expansion across Indian markets.
In terms of retailer types, mass market brands and mid-range fashion brands are expected to look towards India’s highly populated markets for expansion in 2015; while bridge brands and retailers in the luxury sector will likely focus on the more mature markets of Japan, South Korea, Singapore and Hong Kong.
Challenges for retailers
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. Retailers will also be expected to put a general focus on portfolio reviews and consolidation, while continuing to display a strong interest for well-established properties and locations in markets with a proven track record.
A shift towards quality retail properties is expected to become a prominent theme for retailers, in terms of finding the right location, the standard of retail facility and sophistication of shopping center management. Global retailers too are expected to demonstrate a strong preference for well positioned shopping centers operated by experienced developmentor property management firms with a proven management record, especially when they expand to new areas or markets such as India.
An increased level of competition is anticipated to be especially visible in the shopping center environment, where retail property landlords will have to utilize a range of strategies to ensure that they stay relevant and continue to attract shoppers as well as tenants.
