Track2Realty: International expansion remains high on the agenda for retailers in 2015, in spite of uncertain economic prospects and cost escalation. CBRE’s research report, How Active are Retailers Globally?, has several interesting implications for the Asia Pacific (APAC) region, with some 85% of luxury and business fashion retailers looking at the region, and 67% of coffee and restaurant retailers doing the same.
According to the report, which examines the global ambitions of retailers based out of Europe, the Middle East, Africa, the Americas and Asia Pacific—around 6% of global retailers would be targeting India in 2015.
Physical stores remain the destination of choice for consumers, and in recognition of this, retailers continue to open stores in diverse locations. Asia Pacific was one of the most popular regions globally for store openings, with 43% of retailers planning to open in Asia Pacific by the end of the year.
Leading retail markets in India (e.g., Mumbai and Pune), meanwhile, observed enhanced enquiries from both domestic and global retailers looking to expand their footprint during the first few months of the year. India’s leading retail districts also attracted global F&B retailers, such as Café Coffee Day, Starbucks, Eagel Boy Pizza and Dominos, among others. Going forward, brands such as Burger King are likely to open stores in India’s major cities in forthcoming months.
Anshuman Magazine, Chairman and Managing Director, CBRE South Asia, commented, “Given the ongoing challenges retailers face, from cost escalation to changes in consumer behavior, it is increasingly important for them to have a strong network of stores to effectively represent their brand. The cost to open a new store remains a challenge in prime retail districts, especially since such key shopping areas lack available quality space. However, rental growth will be slower this year as retailers remain cautious, while taking longer on leasing decisions.”
Retailers have recognised the overwhelmingly positive attitude that shoppers have in engaging with the physical store environment and are committed to opening more stores. This gives further credence to the view that the retail experience remains absolutely fundamental to the shopper.
Germany tops global tables; China leads in Asia
The CBRE research reveals that Germany has retained its number one position globally for the second consecutive year as the most popular retail market in the world, with 40% of retailers planning to open a store there in 2015. Global retailers continue to be attracted to Germany largely due to the opportunity to target more than 30 large cities with high purchasing power. China (28%) takes fourth place in the CBRE study, while Hong Kong ranks sixth with 22% of retailers targeting the territory. Japan, South Korea, Australia and Singapore are also in the top 20 global destinations. Compared to 2014, retailers’ interest is more focused on developed economies in Asia Pacific.
Elsewhere in Asia Pacific, demographic growth, urbanization, and increasing household incomes will continue to support continuous growth in the region. Consumer confidence has steadily improved over the course of 2014, a trend which is expected to continue in 2015. The increase of regional tourist arrivals will continue to be one of the main drivers underpinning retail sales growth in this region.
However, retailers are most concerned about cost escalation and unclear economic prospects. Anshuman Magazine added, “Retailers will be selective in new store openings, because of rising operations and occupancy costs. A more strategic approach towards portfolio management is needed, and they are recommended to look for locations with a proven trading history, or well-located new projects developed and operated by reputable, experienced landlords.”
Overall, appetite for international expansion remains a strong focus as retailers are expected to continue to invest in their store network throughout 2015.
