Asia Retailers Turning More Cautious, Leasing Activity Weaken

Asia Retailers Turning More Cautious, Leasing Activity Weaken

Commercial News » Tokyo Edition | By Miho Favela | July 6, 2015 10:10 AM ET

In spite of the first quarter of the year traditionally being a quiet leasing period, several markets in Asia Pacific still recorded prime rental growth, including Tokyo, Melbourne, Sydney, Ho Chi Minh City, Wellington, and Manila. However, retail leasing activity in the region has weakened further as retailers turned more cautious, says CBRE.
Dr. Henry Chin, Head of Research at CBRE Asia Pacific commented, "Tourism is lately continuing to influence the regional retail market, particularly in South Korea and Japan. Core shopping districts in both markets continued to see sales benefit from the influx of shoppers from mainland China. However, with the recent MERS outbreak, the tourism sector has been hit hard in South Korea. This is affecting retailers as people are avoiding public areas with large crowds, particularly shopping malls and restaurants. Online retail is benefitting from the outbreak however, as South Koreans opt to shop for food and daily necessities from the safety of their own home, as reflected by the 60% y-o-y growth in online shopping sales of hypermarkets during the first week of June. Elsewhere in Hong Kong--despite its top ranking--Q1 2015 saw sluggish leasing activity due to a change in tourist consumption patterns and concerns over the outlook of visitor arrivals, in particularly from China. Following the implementation of a new rule allowing Shenzhen residents only one trip into the city per week, Hong Kong's retail sector may experience additional pressure, however, the impact of this should be limited.
Overall, regional retail sales will remain largely stable in 2015 due to steady fundamentals such as job growth, wage growth, and demographics. Markets to watch include Australia, where the negative impact of the resources sector slowdown should be offset by stronger consumer, housing and export demand. CBRE expects domestic retail sales growth of around 4.0% to 5.0% in 2015, backed by falling energy prices, lower interest rates and the increasing wealth effect."
Asia Retail key highlights:
  • Five out of the top ten most expensive prime retail markets are located in Asia Pacific. Hong Kong retained its status as the world's most expensive prime retail market in Q1 2015 followed by New York and London; Tokyo, Melbourne, Sydney and Beijing also feature in the top ten ranking.
  • Vietnam's Ho Chi Minh City jumped 15 places up the rankings to 34th position due to one exceptional leasing transaction in which Gucci leased a 400-sq. m. unit in the Sheraton Hotel
  • Stronger leasing demand from luxury brands are recorded in Australian markets. Melbourne and Sydney are seeing redevelopment and renovation activities in their CBDs, which are set to provide retailers more opportunities to expand and support further rental growth.
  • Southeast Asian markets such as Jakarta and Manila are seeing leasing and expansionary demand from international retailers looking to tap into the domestic markets
  • Singapore was one of the weaker markets in Asia Pacific. Retailers there have turned more cautious due to slower retail sales and the ongoing manpower shortage. Q1 2015 saw a wave of closures and more secondary space became available.

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