Click here
 

Cushman & Wakefield Research

When Published, Singapore
City and market analytical reports covering emerging markets in the Asia Pacific region by global real estate solution provider Cushman & Wakefield
 

MarketBeat Asia Pacific Retail Report - 2Q 2011

Sep 28, 2011
  • Print

ASIA PACIFIC RETAIL REPORT 2Q11
ECONOMY Economic activity has begun to moderate after nearly two years of rapid growth. The sluggishness in advan ced economies has begun to impact export growth within the region; already, Singapore and South Korea have expanded at a slower-thanexpected pace in the second quarter largely on account of lower growth in exports and manufacturing output. Even so, some of the largest economies in the region ­ China, India and Indonesia ­ are continuing to grow at a fast rate. In Japan, companies ­ particularly in the auto sector ­ continued to ramp up production, thus indicating that supply chain problems are now on the mend. Overall, growth within Asia Pacific region remains fairly healthy. Consumption remains a critical growth driver, propelling retail sales ­ due to rising employment and disposable incomes, high consumer confiden ce, in creasing urbanization in Tier 2 and 3 cities, as well as a continued boom in tourism in most countries. Notably, even retail sales in Japan are reportedly returning to normal as the summer season begins. However, real in come growth in the region continues to be eroded by higher inflation, averaging about 5.0% so far this year. OVERVIEW Strong consumption continued to fuel a vibrant retail sector in the region, especially in the luxury segment. According to luxury goods companies such as PPR SA, Salvatore Ferragamo Spa, and LVMH Moet Hennessy Louis Vuitton SA, first half sales in the region were exceptionally strong and they remain for the rest of the year. Even De Beers SA, the world's largest seller of rough diamonds, announced its plans to open more retail outlets in mainland China and a second store in Hong Kong this year. Italian fashion designer Prada plans to double the number of outlets for its sister-brand Miu Miu to 55 in the region by 2014. Floren ce-based shoemaker Salvatore Ferragamo claims it sells more products in Hong Kong than any other city in the world and plans to boost its presence in high-growth markets of Asia. Retailers were willing to pay higher rents because of robust sales. Rental rates were flat-to-in creasing from the prior quarter for both main streets and shopping malls across the region. Rental growth on premium retail streets was most notable in Hong Kong. Retailers competed for prime space particularly in Causeway Bay, where rents advan ced another 5.0% from the first quarter to US$1,941 per square foot (psf) per year this quarter ­ making it the most expensive shopping area in the region on ce again. Shopping mall rents in Beijing's downtown Wangfujing district have doubled from a year ago to US$413 psf p er year in the second quarter. Retail rents in Beijing's CBD and Xidan submarkets have in creased more than 50% over the same period.
ECONOMIC INDICATORS
GDP Growth Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Philippines Singapore South Korea Taiwan Thailand Vietnam 2010 2.0% 10.3% 6.8% 10.4% 6.1% 3.9% 7.2% 2.5% 7.3% 14.5% 6.1% 10.8% 7.8% 6.8% 2011F 3.3% 9.0% 5.6% 7.3% 6.5% 0.2% 5.0% 0.6% 5.0% 5.8% 5.0% 5.0% 5.2% 6.5% 2012F 4.2% 9.0% 4.5% 8.1% 7.4% 2.4% 5.5% 3.0% 5.5% 5.0% 5.4% 4.6% 5.7% 7.3%

Source: IMA Asia, Consensus Economics

HIGHLIGHTS - NEW COMPLETIONS THIS QUARTER

Country: China City: Beijing Address: Haidian district Total retail area: 699,653 sqft Positioning: Middle

Living Mall
Country: China City: Chengdu Address: Tianfu Square Total retail area: 598,472 sqft Positioning: Middle-High

Far Eastern Department Store

1

ASIA PACIFIC RETAIL REPORT 2Q11

ASIA PACIFIC RETAIL REPORT 2Q11
Asia remains a preferred expansion destination among retailers. Both international and domestic retailers ranging from food and general retail, fashion and apparel, fast moving consumer goods and luxury items during the quarter continue to seek growth opportunities within the region. Japan-based Aeon Co. plans to expand its network of shopping malls in Asia outside Japan to about 50 by fiscal 2013. Leading Korea consumer goods retailer Lotte Department Store revealed plans to open five stores in several Indonesian cities by 2018 to capitalize on growing wealth in the country. Ford announced that it is investing heavily in Asia by building 15 to 20 new plants within the region, in light of heavy demand for small and medium-size vehicles particularly in China and India. Apple also announced its plans to build a third, even larger Shanghai store, as well as dozens of other stores throughout China. Clothing retailer Tommy Hilfiger is setting itself up for a major move into Asia. The company is taking over the right to sell its own brand in China, where it was previously distributed through a licensing agreement. It hopes to grow its sales in the region to one-third of global revenue, up from just over 10% now. New York-based Magnolia Bakery, which is known for its cupcakes, received state approval to sell fran chises overseas. The company is cu rrently in n egotiation with prospective buyers in Hong Kong and India, among other places. Retailers are tapping the equity markets to fund expansion plans. China's leading hypermarket operator Sun Art Retail Group, backed by Fran ce's Groupe Auchan, says it plans to open over 50 new stores in Mainland China by the end of 2012 using half of the pro ceeds from US$1.06 billion from a Hong Kong share sale in July. SRS Ltd, a Faridabad-based retail firm, plans to raise as much as 225 billion rupees (US$50.2 million) in an initial public offering (IPO) to fund expansion plans in India. Italian luxury goods maker Prada has issued additional shares to boost its Hong Kong IPO, after raising a lower-than-expected US$2.14 billion during its stock debut in Hong Kong in June. Strengthening retail fundamentals continued to bolster investment activity. Retail property sales results reveal continued momentum during the quarter, with year-to-date volume of US$11.6 billion, well above sales of $8.4 billion recorded over the same period a year ago. We exp ect these trends to continue over the course of the year, largely driven by solid economic and retail property fundamentals as well as sustained capital availability. Hen ce, 2011 could prove to be a notable year for retail acquisitions.

OUTLOOK The retail growth momentum is expected to remain strong on the back of relatively sanguine economic prospects of the region. Though the outlook is clouded largely by ongoing challenges in the U.S. and Eurozone that could shake investor confiden ce, the regional economy remains intact, and is expected to expand at a healthy pace of 5.0% - 6.0% for all of 2011 from the high level of 7.0% in 2010. Steady economic growth will continue to fuel employment and income gains and in turn, buoy consumer sentiment. This, together with vibrant tourism, will continue to bode well fo r the retail sector in the region. Such growing retail strength continues to fuel a proliferation of retail projects in the region. Several mega-projects (with at least 1 million square feet of retail space) are under way in Seoul, Mumbai National Capital Region and Pune in India and some cities in China. While economic and demographic prospects are exp ected to remain favorable within the region, the rapid pace of development is raising the risk of oversupply in some cities particularly in China and India. Some projects in the pipeline are lo cated in areas with an abundance of retail supply that already boasts high vacancies and untested demand. Some ongoing legislation may alter retail consumption in the region. The potential redu ction of import taxes on luxury goods in mainland China is expected to have some repercussions on retail sales in Hong Kong. While the move is aimed at spurring domestic consumption in line with the objectives of China's five-year plan through 2015, it may curb spending by mainland visitors in Hong Kong at a time when the city's retail stores have become in creasingly dependent on tourists. Meanwhile, the cabinet committee in India has recommended to allow up to 51% FDI in multi-brand retail. This will enable retailers to raise capital and allow suppliers and vendors to gain scalability.

2

ASIA PACIFIC RETAIL REPORT 2Q11

ASIA PACIFIC RETAIL REPORT 2Q11
MARKET HIGHLIGHTS
PRIME RETAIL (MAINSTREET)
COUNTRY China China China China India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India Japan Japan Japan Japan Korea Korea Korea CITY Hong Kong Hong Kong Hong Kong Hong Kong Ahmedabad Ahmedabad Ahmedabad Ahmedabad Bangalore Bangalore Bangalore Bangalore Bangalore Bangalore Bangalore Bangalore Bangalore Bangalore Bangalore Chennai Chennai Chennai Chennai Chennai Chennai Chennai Chennai Chennai Chennai Hyderabad Hyderabad Hyderabad Hyderabad Hyderabad Hyderabad Hyderabad Hyderabad Hyderabad Hyderabad Hyderabad Hyderabad Kolkata Kolkata Kolkata Kolkata Kolkata Kolkata Kolkata Kolkata Kolkata Mumbai Mumbai Mumbai Mumbai Mumbai Mumbai Mumbai NCR NCR NCR NCR NCR NCR Pune Pune Pune Pune Pune Pune Tokyo Tokyo Tokyo Tokyo Seoul Seoul Seoul MARKET/SUBMARKET Central Causeway Bay Tsim Sha Tsui Mongkok CG Road Law Garden Satellite Road SG Highway MG Road Brigade Road Commercial Street 100 Feet Road, Indiranagar Jayanagar, 4th Block, 11th Main Sampige Road, Malleshwaram 80 Feet Road, Koramangala Vittal Mallya Road New BEL Road Marathalli Junction Kamanahalli Main Road Nungambakkam High Road Khader Nawaz Khan Road Cathedral Road ­ RK Salai Usman Road - South Usman Road ­ North Adyar Main Road Anna Nagar 2nd Avenue Purusavakam High Road Pondy Bazaar Velachery Bypass Road MG.Road SP.Road/Begumpet Raj Bhavan Road/Somajiguda Banjara Hills Road No. 1, 2 & 3 Abids Himayathnagar Punjagutta Ameerpet Jubilee Hills Road No.36 Kukatpally NH No.9 A.S.Rao Nagar Madhapur Park Street Camac Street Elgin Road Theatre Road Gariahaat Shyambazar Hatibagan Kakurgachhi VIP Road Linking Road Kemps Corner /Breach Candy Colaba Causeway Lokhandwala, Andheri Fort Fountain Vashi Thane Khan Market Connaught Place (Inner Circle) South Extension I & II Karol Bagh Basant Lok Greater Kailash I,M Block MG Road JM Road FC Road Koregaon Park Aundh Bund Garden Ginza Omotesando Shinjuku Shibuya Myeongdong Gangnam St Apgujeong ASKING RENTS (USD PSF PER YEAR) 1618.00 1941.00 1376.00 858.00 37.00 26.40 27.70 22.40 51.50 116.20 84.50 40.10 64.70 23.80 26.40 48.90 35.70 29.00 35.70 33.00 39.60 33.00 30.40 26.40 33.00 33.00 23.80 34.30 26.40 26.40 23.80 23.80 34.30 29.00 26.40 29.00 26.40 37.00 26.40 19.80 23.80 68.70 67.30 54.10 48.90 39.60 30.40 25.10 36.90 14.50 180.90 108.30 105.60 79.20 92.40 60.70 62.10 316.90 171.70 145.20 85.80 66.00 145.20 79.20 79.20 52.80 39.60 33.00 39.60 1049.00 965.00 755.00 629.00 631.00 530.00 144.00

PRIME RETAIL (MALLS)
COUNTRY China China China China China China China China China China India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India India Singapore Singapore Singapore Indonesia Indonesia Indonesia CITY Beijing Beijing Beijing Beijing Beijing Shanghai Shanghai Shanghai Shanghai Shanghai Ahmedabad Ahmedabad Ahmedabad Ahmedabad Bangalore Bangalore Bangalore Bangalore Bangalore Bangalore Bangalore Bangalore Bangalore Chennai Chennai Chennai Hyderabad Hyderabad Hyderabad Hyderabad Kolkata Kolkata Kolkata Kolkata Mumbai Mumbai Mumbai Mumbai Mumbai Mumbai Mumbai Mumbai NCR NCR NCR NCR Pune Pune Pune Pune Singapore Singapore Singapore Jakarta Jakarta Jakarta MARKET/SUBMARKET Xidan Wangfujing CBD Zhongguancun Sanlitun East Nanjing Rd West Nanjing Rd Middle Huaihai Rd Xujiahui Lujiazui Vastrapur SG Highway Drive-in Road Kankaria Koramangala Magrath Road Cunningham Road Mysore Road Vittal Mallya Road Whitefield Rajarajeshwarinagar Malleshwaram Bannerghatta Road Chennai - Central Chennai - Western Chennai - South NTR Gardens Himayathnagar Banjara Hills Road No.1 Madhapur South Kolkata Salt Lake Rajarhat Elgin Road Lower Parel Malad Link Rd. (Andheri W) Mulund Goregaon Vashi Ghatkopar Thane Gurgaon Noida South Delhi West Delhi MG Road Bund Garden Road/Koregoan Park Ganesh Khind Road Nagar Road Orchard Road City Fringe Suburban Areas Overall Primary location Secondary location ASKING RENTS (USD PSF PER YEAR) 344.00 413.00 250.00 121.00 172.00 347.00 341.00 289.00 318.00 331.00 20.60 17.20 18.50 11.90 105.60 83.20 52.80 34.30 92.40 39.60 31.70 58.10 42.30 70.00 60.70 52.80 34.30 39.60 63.40 59.40 83.20 105.70 39.60 140.80 126.80 121.50 105.60 72.60 79.20 52.80 67.30 62.10 55.50 66.00 118.80 66.00 47.50 37.00 18.50 19.80 375.12 236.52 278.16 78.40 108.50 65.80

3

ASIA PACIFIC RETAIL REPORT 2Q11

ASIA PACIFIC RETAIL REPORT 2Q11

MARKET HIGHLIGHTS
SIGNIFICANT 2Q11 NEW LEASE T RANSACT IONS
COUNTRY CITY PROPERTY LOCATION TENANT SQUARE FEET

Japan Japan Indonesia China China India India China Singapore India

Tokyo Tokyo Jakarta Chengdu Shanghai Pune Ahmedabad Shanghai Singapore Hyderabad

Currently known as Mitsukoshi Alcott LABI Shinjuku Nishi-guchi Kan (West-gate Building) Malartha Gading Pearl River New Town International Chengshan Rd Fortaleza Standalone Wanda Plaza Orchard Building Standalone

Shinjuku Shinjuku North Jakarta Wenjiang Pudong Kalyani Nagar S.G. Highway Jiang Qiao 1 Grange Road Punjagutta

Bic Camera LABI Matahari Gome Media Markt Megamart Pantaloons Marks&Spencer H&M Womens World

215,278 85,508 64,583 53,820 49,514 40,000 35,000 32,292 32,000 30,000

SIGNIFICANT 2Q11 SALE T RANSACT IONS
COUNTRY CITY BUILDING Buyer SQUARE FEET PURCHASE PRICE (US$ million)

South Korea China Singapore

Seoul Beijing Singapore

Pangyo Alpha Dom City Guancheng Plaza 50's Entertainment Complex

Hyundai Department Store Capita Mall Asia Private investor

1,917,717 968,783 -

$601 $186 $10

SIGN IFICAN T 2Q11 PR OJECT S U N D ER CON ST R U CT ION
COUNTRY CITY PROPERTY LOCATION SQUARE FEET YEAR OF COMPLETION

South Korea South Korea South Korea India China India India India China Thailand

Seoul Seoul Seoul NCR Chengdu Mumbai Mumbai Pune Beijing Bangkok

Dcube Hills Parc.1 AlphaDom City Grand Venezia Suning Plaza Market City Viva City Amanora Indigo Rama IX Square

Sindorim Yeouido Seongnam Greater Noida Xinnantiandi Kurla Thane Hadapsar Jiuxianqiao. Central Fringe

2,474,857 1,937,502 1,885,900 1,200,000 1,029,029 1,000,000 1,000,000 1,000,000 925,695 896,633

3Q11 4Q12 (Est) 4Q13 (Est) 4Q11 3Q11 4Q11 1Q12 3Q11 3Q11 2Q12

FOR INDUSTRY-LEADING INTELLIGENCE TO SUPPORT YOUR REAL ESTATE AND BUSINESS DECISIONS, GO TO CUSHMAN & WAKEFIELD'S KNOWLEDGE CENTER AT:

www.cushmanwakefiel d.com/k no wle dg e

This report contains information available to the public and has been relied upon by Cushman & Wakefield on the basis that it is accurate and complete. Cushman & Wakefield accepts no responsibility if this should prove not to be the case. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals. For industry-leading intelligence to support your real estate and business decisions, go to Cushman & Wakefield's Knowledge Center at cushmanwakefield.com/knowledge ©2011 Cushman & Wakefield. All rights reserved.

Cushman & Wakefield 3 Church Street, #09-03 Samsung Hub, Singapore 049483. Tel: +65 6535 3232 Fax: +65 6535 1028

4

ASIA PACIFIC RETAIL REPORT 2Q11