Lack of quality retail space in India’s top cities pose deterrent for new retailer entries

By: Anshuman Magazine, CMD, CBRE South Asia

Track2Realty: Emerging markets are offering interesting investment opportunities in terms of shopping center development, according to the latest Asia Pacific Retail Trends and Retail Hotspots reports released by CBRE. The Asia Pacific market in particular continued to see a steady flow of new retailer openings in 2013, amid steady economic growth and generally positive consumer sentiment.

Southeast Asia, in particular, continued to mature rapidly with the completion of new retail space and increasingly sophisticated consumers, which spurred the arrival of new retailers from overseas. The top five countries of retailer origin, however, remained unchanged over last year. New retailers from the Americas remained the most active, with 71 new entries across Asia Pacific in 2013. Retailers from Italy (47), the United Kingdom (40), France (37) and Japan (24) completed the top five.

While Hanoi recorded the highest number of new entrants (30) of any city in Asia Pacific in 2013, Hong Kong (28) came a close second, followed by Beijing (27), Shanghai (26) and Singapore (25). In India, demand from international retailers in New Delhi (16) remained more-or-less stable over last year, as more groups sought space in prime shopping centers as opposed to high street shops.

Despite the prevailing high rentals in the prime shopping locations of many established Asian cities, leasing demand for space in these prime spots remained strong throughout the year.

Not prohibitive rentals, but the limited availability of quality retail space in core locations would seem to have continued to pose a greater barrier to new retailer entry in a number of key emerging Asian markets—including New Delhi, Mumbai and Bangalore.

Demand from international retailers in Mumbai and New Delhi remained stable during the year, with interest from fast fashion groups in particular remaining firm throughout 2013. Recent quarters also saw a number of well-established international mass market brands enter tier-II locations, partly because of the lack of quality space options in tier-I markets.

Luxury and Business Fashion retailers entering Asia Pacific for the first time, continued to opt for Hong Kong and Tokyo as the location for their first outlets. In comparison, groups already established in the region focused on expanding in the emerging cities of China, India and Southeast Asia.

The outlook for the Asia Pacific economy remains relatively positive. While domestic consumption is healthy in most parts of the region, consumer sentiment too remains healthy, albeit clouded to a certain extent by larger global economic uncertainty.

India will continue to see some retail activity, although the rate of overseas retailer entry could decelerate due to the complications surrounding new legislation regarding foreign direct investment in multi-brand retail. All in all, global retailers are likely to continue focusing on the Delhi National Capital Region (NCR) as their main entry point into the Indian retail market, with several additional new openings expected in the coming months.