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Tag: retail space

  • Good direction for Korean rental booms

    Good direction for Korean rental booms

    South Korean Rental services, which in the past were typically limited to water purifiers or bidets in South Korea, are rapidly embracing other products.

    According to big data analysis firm Daumsoft, online mentions of “rental service” on blogs and Twitter more than doubled over the past three years from 75,300 in 2014 to 177,003 in 2016, and now include more lower priced goods, with shorter rental periods.

    Although water purifiers still ranked first in terms of the number of references, apparel such as clothes, coats, and bags have developed a significant presence in the rental market recently, officials said.

    For instance, the word “clothes” as a related term for rental services increased from 5587 mentions in 2014 to 23,047 in 2015 and 31,112 in 2016, while “coats” and “bags” soared from 108 to 14,777 and 454 to 3228 from 2014 to 2016, respectively.

    “While dress rentals for parties or other special occasions are most popular overseas, renting clothes for weddings (as guests), job interviews, and company meetings is also popular in Korea,” the company said. “The reason behind the dramatic increase in the number of ‘coats’ and ‘bags’ is probably because they’re among the more expensive fashion items.”

    Women were the biggest customers of the rental services, the analysis showed, with the word “women” topping the list in terms of the number of online mentions (at 23,848), followed by “babies”, with Daumsoft adding that baby products are increasingly sought after by local mothers.

    “During economic hardships, people tend to think twice about their spending and try to get the most out of their budget,” said professor Oh Se-jo at Yonsei University School of Business, adding that people compare more carefully the quality and the diversity of their consumption.

    “Rental services best serve consumers who want to save but at the same time pursue their interests and hobbies, which is why they’ll continue to grow,” he said.

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  • Retail space vacancy expands 8.4% in Q3

    Retail space vacancy expands 8.4% in Q3

    It is the highest vacancy level since 1Q11.

    Island-wide, overall vacancy for retail spaces rose 8.4% in 3Q16, recent figures from Urban Redevelopment Authority showed. According to CIMB, this has been the highest level since 1Q11.

    The brokerage firm noted that well-positioned malls integrated with major transport nodes will continue to withstand this waning demand for retail spaces.

    CIMB noted that this was manifested by the portfolios of CapitalLand Mall Trust, Fraser Centrepoint Trust, Mapletree Commercial Trust and SPH REIT.

    “We expect retail landlords to focus on F&B and retail-tainment/lifestyle offerings to combat the drop in consumers’ purchasing power,” the firm argued.

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  • Pop-Up Stores In Hong Kong: Fad Or The Future?

    Pop-Up Stores In Hong Kong: Fad Or The Future?

    With vacancy at less than 1% in Hong Kong’s prime shopping malls, is it any wonder why brands, particularly those new to the market, are opting to grab a slice of the action by entering the market by doing a pop-up store. So what is a pop-up?

    • žžPop-up retail, also known as pop-up store or flash retailing, is a trend of opening short-term sales spaces.
    • žžA pop-up retail space is a venue that is temporary — the space could be a sample sale one day and host a private cocktail party the next evening.
    • The trend involves “popping-up” one day, then disappearing anywhere from one day to several months later.
    • žžThese shops, while small and temporary, can build up interest by consumer exposure.
    • žžPop-up retail allows a company to create a unique environment that engages their customers, as well as generates a feeling of relevance and interactivity.
    • žžPop-up retail also provides retailers to “prove” themselves in certain locations before the landlord decides whether they will provide them a shop on a long-term basis.

    Many brands are entering Hong Kong using the pop-up store model as a way to showcase their products. Although the stores are on a small scale and in a confined space, when done correctly, they allow customers to get a taste and a feel for the brand.

    Advantages for the landlord

    • Limited risk. It is allows the brand to occupy a small area that would otherwise be an open void space, a vacant shop or a shop that is undergoing some alteration work. This allowsthe landlord to maximise occupancy levels and revenues in what would otherwise be deemed as “dead space”.
    • žžAllows the brand to showcase their products and for the landlord to assess whether the brand is potentially worthy of securing a longer term store within the mall.
    • žžAllows the landlord to assess how the brand operates, how the staff interact with the customers and assess how good their customer service is.
    • žžKeeps the mall interesting and competitive.

    Advantages to the brands

    • žžWith competition for space in Hong Kong being extremely fierce, many brands are left to wait and wait for a prime location to be made available to them. A pop-up store allows them to enter the market more quickly.
    • žžBuild rapport with the landlords.
    • žžShowcase their products and designs to the landlord and use this as a platform to test their merchandise with the discerning Asian customer. In particular, mainland Chinese consumers, whose attention many brands are eager to capture.
    • žžAllows the brand to be uber creative in their design in a small space.
    • žžPop-up stores are usually located in areas with high footfalls which provide maximum exposure and opportunity to the brand.
    • žžRelatively low costs involved.

    Take an example such as Penhaligon’s, a new-tomarket brand that set up a lovely pop-up store in Harbour City and was able to parlay the success of the store to be offered permanent stores in prime locations in Hong Kong and Macau. Goes to show there are advantages to this approach.

    Disadvantages

    • žžLarge amount of investment is often required for what is a small and temporary space.
    • žžLimited time to recoup initial investment, produce impactful marketing and moreover showcase the brand and its DNA.
    • žžSometimes the tenant mix may not be ideal for the brand.
    • žžLocations are often isolated which means the brand has to work harder on the design, customer service and marketing to entice people into the pop-up store.

    Will the pop-up phenomenon remain? From what we can see in terms of market fundamentals and the success many popup concepts are enjoying, the answer is an overwhelming yes. With no let up on demand from brands seeking to expand, space availability being extremely limited and rentals not looking to subside any time soon, pop-up stores will become a more and more enticing option. However it is not all good news, many pop-ups, due to their limited time period and inability for the brand to showcase a sufficient range of products, can sometimes be detrimental to a brand. Take a fashion brand for example. They have hundreds of Stock Keeping Units (SKU’s) in their normal stores but this is often limited to a 10th of that in a pop-up. This could potentially damage the brand’s reputation, perception, sales and ultimately the brand’s ability to expand in Hong Kong. Overall, however, we believe that the positives outweigh the negatives but brands still need to be conscious of what they are doing. They need to have a strategy in place and ultimately know exactly what they are trying to achieve by having a pop-up.

  • Chinese retail real estate crushed

    Chinese retail real estate crushed

    One of the under discussed aspects of rising real estate prices is the attendant rising rents amid a brick-and-mortar retail slowdown. In 2015, the top 100 chain stores saw sales growth of only 4.3 percent.

    Locally, in Beijing the smaller mom-and-pop retail shops as well as national chains are being forced out by high rents, as rental agreements expire and the minimum increases are at least 100 percent. Mix in shifting consumer behavior, particularly the popularity of online shopping, and it is a brutal environment for the least efficient retailers.

    A reporter for the Beijing Evening News heads to Xinjiekou Beida Street to see the impact on the ground.

    Yesterday afternoon, just the beginning of autumn (Liqiu August 7-22) of Beijing is still hot. From Jishuitan subway station out along Xinjiekou North Main Street South a rough count shows about ten small stores at least half with the words “sale”, “clearance” and even more than one “contract expiration” two or three family has to pull the shutter doors, completely closed shop closed state. The old familiar clothes shop has been replaced by a shop selling steamed buns and meat patties. A clothing store retreated from higher rental shops along the street to the alley inside, to attract customers it has a “Grand Sale” promotion red sign hanging.

    Contact by telephone sublease front of the store, correspondent to turn to a store owner. He told reporters that although the lease is to expire in April next year, but because of the difficult business environment, ready to move up, “mainly rents are too high.” The owner said, Xinjiekou traffic here also, but his rented storefront upper and lower rent would more than 1.5 million yuan a year, an average of 129,000 yuan a month, plus the prior renovation costs, operation stress is too great. Now the shop is handbags sale, sell a single inexpensive earn more than twenty yuan, the most expensive also more than fifty yuan. Even under the most expensive 50 yuan terms, without considering other costs, the shop must to sell 2580 each month to pay the rent. The boss said, in order to share the rent pressure, a lot of shops in this street are sharing the rent two- and three-ways.

    Chain stores are feeling the pressure as well:

    In fact, more than street shops closed tide appears, district located in Daphne, Metersbonwe, Ning [ -0.73% ] , Jeanswest and other brand shoes and apparel shops are also rapidly reduced stores. According to Daphne released the first half of 2016, a profit warning report shows only the first half of this year, Daphne net off store 450, including 400 direct sales stores and 50 franchise stores. Once all the rage Metersbonwe business situation is not optimistic about 2013 sales stores and franchise also has nearly 5000, the end of 2015 has been remaining 3700, store sales decreased by about a quarter. Jeanswest in the past 4 years has closed 1012 stores, at the end of 2015 had only 2249 retail stores.

    In the micro-channel circle of friends spread a worldwide brick-and-mortar retail death list, it is revealing physical retail bleak. According to this list were killed in the first half 2016, a second-tier cities major retail companies closed shop more than eighty percent. China Chain hundred reports China Chain Store & Franchise Association released statistics also show that in 2015 the chain of hundred sales volume of 2.1 trillion yuan, an increase of only 4.3%, the lowest ever one. Department stores even have negative growth of -0.7%.

    China Chain Store & Franchise Association, the relevant responsible person said, “This year the store is really a life and death to the moment”, but specialty stores, convenience stores have achieved double-digit growth.

    Entity is not fully closed shop because of the impact of the electricity supplier, there are real weak economic growth, labor costs, rental costs, taxes, weak profits and other reasons. In the late 1990s, chains began a large expansion, rental contracts generally expired in 10 to 15 years, these contracts are now expiring and the rent is at least doubling, some low-margin supermarkets, department stores have been unable to renew the lease.

    Another issue is the failure to embrace changes in the market:

    Beijing Zhi future starting from Consulting Group founder Li pointed out that the impact of the electricity supplier, rent increases, etc. are one of the most direct reason. But more than the rent, labor, electricity providers more powerful impact, and is continuing under the influence of these factors, changes in consumer spending habits occurred. More important reason is consumer behavior, consciousness, the pursuit of consumer convenience, reliance on technology and the like. On the other hand, traditional commercial aspects of the transition moves more slowly. Department stores these years has been to break, suffer not found the right ways, not kept pace with changes in consumers.

    Li Zhi said that from the domestic and international experience, the current transformation of department stores there are two main directions. On the one hand is to break through the high-end direction, shrinking front, the focus is more on the line, service requirements are relatively high business forms; in the other direction is toward a more pluralistic, more inclusive development, to provide similar shopping mall such a large, integrated leisure experience scenes business forms.

     

  • Luxury prevails in Dubai’s retail space

    Luxury prevails in Dubai’s retail space

    Despite suggestions to the contrary, luxury retail spending is still rising in the UAE, albeit at a slower pace.

    Dubai, in particular, is leading the way. In a survey carried out before the World Retail Congress last month, Dubai Chamber said the retail sector in the emirate was expected to grow by 5 percent annually until 2017, by which point it was forecast to reach $55bn in value.

    The research, based on data from Euromonitor and an AT Kearney Research study, suggests luxury retail still offers multiple opportunities in the UAE.

    “There is growth of wealthy and ultra-rich consumers, the main potential customers of the luxury segment. All in all, consumption is going up and retailing in the UAE is a major sector, which is supportive of economic growth and offers a lot of business opportunities,” the analysis says.

    The research is supported by Savills, which ranked Dubai at number four in the world in its Global Retail Destination Index 2016, behind New York, London’s West End and Hong Kong.

    The report focused on Dubai Mall, and ranked it higher than London’s Regent Street, New York’s Fifth Avenue and the Champs-Elysees in Paris in terms of the overall quality of its retail facilities and amenities. Further enhancing Dubai Chamber’s findings, the Savills report says, “Dubai is forecast to report the strongest growth in retail sales over the next five years of the seven Global Cities examined, potentially challenging London’s West End’s current global position.”

    The growth is supported by a strong tourism sector, with 14.3 million overnight visitors to Dubai last year, according to the Mastercard Global Destination Cities Index 2015, which led to a total spend of $11.7bn, an average of $819 per visitor.

    “Dubai is now perceived as a top global retail destination,” says David Godchaux, CEO of Core Savills, the UAE associate of Savills. “But this is only the tip of the iceberg as we now start seeing developers trying to improve the shopping experience not only for tourists as in the past 15 years, but also for residents.

    “This trend of moving away from the ‘bigger is better’ approach, to more user and resident friendly retail developments, bringing a real city experience and European-style shopping to areas of Dubai similar to those found in London, Paris and Milan, is something that was much awaited by the market and that we see finally happening.”

    Dubai Chamber estimates the emirate’s retail market reached $35.4bn last year, and says it is expected to grow by 7.7 percent in 2016 and an average 8.1 percent annually between 2017 and 2020, when retailing sales turnover are expected to surpass $52bn.

     This predicted growth comes despite the backdrop of uncertainties surrounding economic conditions due to the drop in oil price, and the obvious currency effects of a strong dollar and a weak rouble affecting the number of high-spending visitors coming to the emirate.

    That effect was reflected in last year’s Luxury Goods Worldwide Market Monitor, compiled each year by Bain & Co, which said the luxury goods retail market in the Middle East had plateaued, driven by a reduction in tourism spending.

    However, the report’s author Cyrille Fabre, partner and head of Bain’s Retail and Consumer Products practices in the Middle East, said at the time the report was released: “Going forward, we expect the Middle East market to show new signs of life driven by mall openings, but the region’s growth will occur at a much slower level versus the last five years.

    “A sustainable high single-digit growth rate will become a new normal for the market with important implications of the required capabilities for success.”

    Knight Frank’s head of commercial and retail, Matthew Dadd agrees: “At the moment in the UAE, we’re not seeing much take-up of new luxury retail space.”

    The confidence in the luxury retail market, however, has been fairly evident at the city’s two key shopping malls, he says, with other cities keen to develop their luxury retail offerings as well, which have continuously lagged behind Dubai in the luxury segment.

    “Within the major malls there is the configuration-extension of the luxury segment offering, both within Mall of the Emirates and Dubai Mall,” he says. “Also, when you look regionally, there is the provision of quality, prime retail centres such as Mall of Qatar or the forthcoming Majid Al Futtaim centres in Riyadh regarding new luxury space for the market segments which have traditionally been under-served.”

    Looking to the year ahead, Dadd says the single-figure growth is quite likely, but confidence remained high. “It’s going to remain fairly stable in its current state, which has been more subdued than it has been in previous years,” he says.

    “We’ve still got a high GDP per capita for locals across the GCC. There is still a lot of personal wealth that can be spent in the luxury segment. You will see the mall developers looking to position themselves as the focal go-to destination of luxury spend and the access and the add-on amenities in terms of leisure that really make the mall appealing for the whole family will be paramount to obviously increasing the spend per head in these malls and retaining that spend within Dubai, UAE or the region rather than going internationally.”

    That confidence is also reflected in the ability of some malls to increase their rent.

    According to Knight Frank, Emaar Malls Group has 18.5 percent of the emirate’s 3 million square feet (sq ft) of retail gross leasable area. The publicly-listed company, 84 percent owned by Emaar Properties, said it raised rent prices for renewals by 25 percent in 2015. It is also planning to add 92,900 sq ft to its “trophy asset” Dubai Mall this year, further underlining its confidence in luxury retail.

    “The Dubai Mall, our trophy asset, is today the first choice for luxury retail for high net worth individuals [HNWIs] from a wider catchment area of the Middle East, Africa, South Asia and China, thus serving over 2.5 billion people,” chairman of Emaar Malls and Emaar Properties, Mohamed Alabbar said while announcing Emaar Malls’ annual figures for 2015. The division recorded a $451m net profit and rental income growth of 11 percent to $815m.

    However, Dadd says the rental increases have been limited to “the core markets”.

    “Across the markets, you’re not seeing exorbitant rent increases,” he says. “I think the market is being more realistic in terms of where spend is and it has got to be truly reflective of the overall performance of the mall before they can actually start putting in any increments.”

    The perennial issue for luxury retailers is exodus of HNWIs from the Gulf region to cities in Europe and the US, as they escape the desert summer.

    The Saudi government estimated that in 2014, tourists travelling outside the kingdom spent at least $20bn on shopping trips abroad every year.

    A report towards the end of last year, by the Travel & Tourism Intelligence Centre, said GCC outbound expenditure would reach $100bn by 2018, up from $65bn in 2013.

    Knight Frank’s recent wealth report emphasised the seasonal fluctuations of multi-millionaire ($10m-plus) populations around the world, showing a 571 percent difference in the number of multi-millionaires in Dubai between the winter and summer months (10,470 at peak, 1,560 at low).

    Maintaining brand loyalty has been an important facet when it comes to luxury retailers. Luxury brand public displays and activations are a weekly occurrence in Dubai’s malls. Dadd says it is important to enhance customer consumer experience in order to develop brand loyalty.

    “When you go into any shop, it doesn’t matter if it’s luxury or mainstream trade, your experience is paramount to your return visit,” Dadd says. “When you look at international brands that have local stores that experience has got to be the same level of standard and quality [as the home market] in terms of customer experience with the staff and the shop, the fit-out, the apparel or the merchandise that are being sold. So you’ve really got to ensure that is kept to a high standard when you’re talking about an international brand.”

    An extension of the brand loyalty is the need for luxury retail brands to implement an omni-channel experience into their customer engagement strategies, which means engaging in e-commerce.

    “If you’re looking at the base case scenarios of where online trends are at the moment, they’re obviously coming from a very low base,” Dadd says. “I think they are picking up and if you look at where the UAE is in terms of digital accessibility, it’s number three in the world after UK and US, so when you look at where the take-up is in terms of mobile access and access to retail platforms, that is growing very quickly.”

    While still in its infancy in the region, recent moves by high profile companies based in the Middle East have underlined the need to develop and grow an online presence.

    “You can look at where Marka VIP have launched their new online portal and obviously we see Mohamed Alabbar taking a stake in [European online luxury fashion site] Net-a-Porter to expand that across the Middle East. It’s showing how the market is developing, maturing and following the trends that we’re seeing in Europe, US and Asia.

    “But I still don’t think it will necessarily be of concern yet to any of the bricks-and-mortar of the retail industry, because it’s still very much an experience when you’re going to buy a luxury product.”

    A natural extension of that has been social media, in particular Instagram, which has become one of the most influential online tools for luxury brands.

    “Instagram is obviously a visual tool and when you’re looking at the luxury segment — IWC or Prada — these brands can very much sell a lifestyle through images which is a very quick and easy way of targeting large proportions of the population which has access to social media,” Dadd says.

    “The influence of Twitter can’t be underestimated in Saudi Arabia, which has the highest penetration of Twitter followers.”

    At the heart of brand loyalty — online or in the malls — is the customer.

    “Customer experience is paramount and it has to transcend everything — online or in-shop,” Dadd says. “The brand is core to any business, and in the luxury segment it is key. Brands have got to work a little bit hard to make sure they position themselves correctly throughout all platforms.”

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  • Weaker Economic Environment in Asia Continues to Impact Commercial Markets

    Weaker Economic Environment in Asia Continues to Impact Commercial Markets

    According to CBRE’s Q1 2016 MarketView, total commercial property investment turnover in Asia Pacific in the first quarter of 2016 declined by 36% quarter-on-quarter as investors generally turned more risk-averse, due to stock market volatility and weaker economic environment. Asian capital in particular, however, remained active across the region with the completion of three big-ticket transactions in Greater China by Chinese investors.

    Q1 2016 saw Hong Kong’s second largest-ever transaction for an office property, in which China Everbright Limited acquired the Dah Sing Financial Center for around US$1.3 billion. Regardless of this key deal though, investment activity on the whole remained low in Hong Kong.

    “Despite slower activity in the investment environment overall, international institutional investors are continuing to display strong preferences for core assets in major markets to increase their exposure for strategic diversification,” said Dr. Henry Chin, Head of Research, CBRE Asia Pacific. “In Australia and Japan, however, even though international investors remain active with strong demand for core assets, transaction volume in both markets declined. High prices in Australia discouraged domestic fund managers from purchasing, with some opting to sell non-core assets to recycle capital for future investments. In Japan, despite strong demand from investors, the lack of stock was a limitation as there were fewer institutional quality properties being offered for sale, especially in core markets such as Tokyo.”

    Concerns over the economic climate, along with weaker business and consumer sentiment, have also led to softening occupier markets across the region in Q1 2016.

    “The first quarter of the year is traditionally a quiet period for office leasing,” said Dr. Chin. “The office sector saw a slowdown in leasing momentum overall, however, in China’s tier-one markets such as Shanghai and Shenzhen, office demand remains robust with solid rental growth. Elsewhere, leasing demand is being driven by flight-to-value relocations with firms moving to decentralized areas to reduce costs. Expansionary demand is confined to Shanghai and Mumbai. In light of weakening corporate sentiment, landlords are also becoming more cautious and focusing on tenant retention, especially in markets such as Hong Kong and Tokyo.”

    In the retail sector, Hong Kong suffered its biggest decline in retail sales since 1999, falling by 13.6% year-on-year in January and February combined, due to the sharp drop in tourist arrivals and weaker domestic consumer sentiment. The bulk of Asia Pacific’s leasing demand was driven by fast fashion and F&B retailers. Most Asian markets were quiet but leasing momentum in the Pacific remained healthy.

    “Most Asian retail markets are still negatively impacted by the change in tourist consumption and traveling patterns, especially by Mainland Chinese tourists. The weak Chinese yuan is affecting their spending power. Additionally, in contrast to the last couple of quarters, the strong Japanese yen is beginning to impact visitor spending in Japan, which places pressure on retail sales growth. In Q1 2016, Tokyo saw luxury brands scale back their rate of expansion after a decline in sales, whereas in Pacific, demand from new international retailers remains strong,” said Dr Chin.

    “Many international retailers remain very sensitive to location, driven by flight-to-quality. The coming quarters are likely to see investors re-focus on core properties in major shopping districts. With the current challenging climate, management expertise and knowledge are key issues for retail investors,” he added.

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  • Shopping mall vacancies in town highest in 5 years

    Shopping mall vacancies in town highest in 5 years

    Vacancies at retail malls in the central region hit a five-year high in the first quarter of the year, driven largely by more vacant space in the Orchard sub-market.

    The rate went up from 8 per cent to 8.7 per cent, analysis from Colliers showed, the highest since the Urban Redevelopment Authority (URA) started tracking retail space data including food and beverage, fitness and entertainment businesses from the first quarter of 2011.

    In the Orchard planning area, the vacancy rates rose 1.2 percentage points to 8.8 per cent in the first quarter, URA figures showed.

    These disappointing numbers come as the retail sector continues to battle rising costs, weak sentiment and increased supply of space. The islandwide vacancy rate of retail space rose to 7.3 per cent in the first three months of the year, up slightly from 7.2 per cent in the previous quarter.

    Citing URA Realis data, analysts said retail rental volume plunged by 32 per cent to 1,725 transactions in the first quarter from 2,550 deals in the last three months of 2015.

    “We are seeing higher vacancies setting in, particularly for the newer shopping malls,” said Cushman & Wakefield research director Christine Li. “Besides spaces which have yet to fill up, spaces which tenants have pre-terminated also add to rising vacancy levels.”

    Century 21 Singapore chief executive Ku Swee Yong told The Straits Times malls with higher vacancies in the Orchard area include Shaw Centre, Orchard Gateway, Orchard Central and Palais Renaissance. “Vacancy rate in general will likely worsen in the coming quarters because some retailers have said they would be shutting their non-performing stores later this year,” he noted.

    Dubai-based conglomerate Al-Futtaim Group said last month it would shut 10 stores under its distribution and retailing arm RSH in the second half of the year. Its group chief executive for Asia Christophe Cann said yesterday: “At present, we are looking to exit at places where rentals are too high for us to continue to run a business.”

    He said landlords have a stake in the retail industry, and “it would benefit tenants, and the retail industry as a whole, by lending a helping hand during challenging times”.

    Sakae Holdings chairman Douglas Foo made a similar point, citing a good working relationship with the manager of Wheelock Place, where Sakae Sushi has an outlet. “When we talk about rental renewal, they don’t give you heart attack rates. Certain landlords will up rates by 30 to 40 per cent, and you have to ask how retailers can do a sustainable business like that.”

    The slow leasing activity exerted downward pressure on rents, which fell 1.9 per cent in the first quarter, following a 1.3 per cent drop in the previous three months, URA data showed.

    Consultancy JLL expects retail rents to contract by about 7 per cent to 8 per cent this year, in anticipation that some landlords may have to offer greater discounts to maintain stable occupancy.

    Analysts say other challenges such as the manpower crunch are likely to persist for the rest of the year. Colliers International noted, however, that falling rents in the central area are an opportunity for some brands to open new flagship stores and strengthen their presence.

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  • Prices of retail space, rentals in Singapore down 1.9% in 1Q as vacancies creep up

    Prices of retail space, rentals in Singapore down 1.9% in 1Q as vacancies creep up

    PRICES of retail space in Singapore continued to fall by 1.9 per cent in the first quarter of 2016, after declining 0.1 per cent in the previous quarter.

    Rentals of retail space also fell by 1.9 per cent in Q1, after declining 1.3 per cent in the previous quarter.

    The island-wide vacancy rate of retail space also creeped up to 7.3 per cent at the end of the quarter, from 7.2 per cent at the end of the previous quarter.

    Within the quarter, the amount of occupied retail space increased by 11,000 square metre (nett), while the stock of retail space increased by 19,000 square metre (nett), which led to the rise in vacancy.

    As at end-March 2016, there was a total supply of 783,000 square metres gross floor area of retail space from projects in the pipeline.

     

  • Orchard Road landlords reeling as key retailers exit

    Orchard Road landlords reeling as key retailers exit

    More shops are moving to the suburbs.

    More retailers are opting to vacate their prime spaces in Orchard Road and move to the heartlands instead, according to a report by CBRE.

    This trend exacerbates the problems ailing Singapore’s retail leasing scene, which has been hard-hit by a decline in both tourist and local spending.

    “As part of cost saving measures, more established retailers have opted to relocate out of prime corridors to secondary corridors, especially in the Orchard Road sub-market,” CBRE said in a report.

    Although exits have weighed on rents, CBRE noted that freeing up prime space has allowed landlords to pursue retailers seeking flagship space.

    “Demand is likely to stay patchy with retailers expected to be even more discerning about store location and openings as their operations evolve to include more retail channels. This does not bode well for overall occupancy with more supply dude to complete from now till 2019,” CBRE said.

  • eCommerce won’t dent Asian retail real estate demand

    eCommerce won’t dent Asian retail real estate demand

    Growing online sales will not undermine demand for Asian retail real estate, according to the last CBRE study of major international brands.

    For the seventh edition of How Active Are Retailers Globally?, the real-estate company looked at more than 150 major international brands based in Americas, Asia Pacific and EMEA (Europe, the Middle East and Africa) countries.

    China is the top target market in the Asia Pacific (APAC) and fourth-ranked globally, with 27 per cent of retailers looking to expand there. Hong Kong follows in sixth position (24 per cent), Japan in seventh (22 per cent) and Singapore in ninth (21 per cent). The top three globally were Germany (35 per cent), France (33 per cent) and the UK (29 per cent).

    China and Hong Kong maintained their placings, while Japan, Singapore and Australia (11th) all rose higher in the ranking, up from 13th, 18th and 15th positions respectively.

    “Hong Kong will remain a desirable market for retailers, particularly as it continues to serve as a popular shopping destination for mainland Chinese tourists,” says CBRE Hong Kong executive director for retail services Joe Lin.

    “The main difference is a shift from luxury to mid-range brands. This is forcing luxury retailers to consolidate their footprint, leading to a drop in rental cost in prime locations and therefore opportunities for non-luxury retail brands.”

    Most APAC markets saw increased interest for this year, with the exception of China and South Korea. Malaysia (10 per cent), Indonesia (9 per cent), Thailand, Vietnam and The Philippines (all 8 per cent) received more than double the interest they saw last year, when all markets secured between 1 and 3 per cent.

    Asked about the risk factors for the coming year, brands indicated that real-estate cost escalation (56 per cent) and unclear economic prospects (42 per cent) continue to be at the forefront of their minds.

    “We’re seeing more of a challenging economic environment, and concerns such as high operating costs and a lack of quality space means retailers are somewhat more wary this year,” says CBRE head of Asia Pacific research Dr Henry Chin. “However, even as markets such as China and Hong Kong are experiencing a slowdown, we see increasing numbers of opportunistic retailers looking to enter markets like Hong Kong, supported by strong underlying consumer demand.

    “Japan and Australia remain attractive, while Southeast Asia showed strong growth because of opportunities for retailers around an expanding middle class and stronger economic growth.” CBRE senior director and head of retailer representation for Asia Joel Stephen says there are still opportunities for retailers to grow their business in Asia, underscored by the region having four of the 10 most popular destinations. “The goal now for all brick-and-mortar retailers is to build an engaging offer that encourages people to stay longer and spend more.”

    The survey shows that 83 per cent of brands suggest their physical store expansion plans for this year will not be affected by the growth of eCommerce. From a retailer perspective, only 22 per cent of the brands see stiff competition from online retailing as a threat to their business.

    At the same time, retailers are cautiously optimistic on physical expansion. Of those canvassed, 17 per cent have large-scale ambitions, many of them looking to open more than 40 stores this year (up from 9 per cent last year), while 67 per cent plan to open up to 20 stores.

    “A physical store presence in key locations is still critical to the strength of a brand’s image,” says Stephen. “Customers still feel a need to go into stores, to physically touch a product and enjoy the feel-good factor associated with a particular brand experience. The store is integral to the shopping journey and can be used in different ways, such as to click and collect, research of the product or brand, or to test the product. It isn’t solely about the transactional side.”

    A new trend is brands looking to expand into travel hubs, such as airports and train stations, giving them access to high footfall in busy locations. But for APAC retailers, shopping malls are still the preferred destination by far, at close to 90 per cent.

    While globally the key concern for brands in negotiations for premises is lease length, APAC retailers are most concerned with turnover rent clauses (GP). They are also particularly concerned about changing consumer behaviour (40 per cent), which is higher than the global average (31 per cent).

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  • Kuala Lumpur MRT retail spaces up for grabs

    Kuala Lumpur MRT retail spaces up for grabs

    Kuala Lumpur MRT retail spaces – 41 spots at 21 stations – have been put to tender.

    The Mass Rapid Transit Corp (MRT Corp) says proposals and bids for the spaces, on the upcoming MRT Sungai Buloh-Kajang line, must be submitted by April 18.

    Commercial land management director Datuk Haris Fadzilah Hassan says the company hopes to announce successful applicants by the end of June.

    About 30 per cent of the units have been set aside for indigenous entrepreneurs, and Haris says the company is seeking retailers for the balance who have “exciting business ideas and services, suitable for commuters with fast-paced mobility and urban lifestyle”.

    Small and local businesses are encouraged to apply, and more retail spaces will become available in the future.

    The Sungai Buloh-Kajang line will open near the end of this year.

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  • Hong Kong International Airport Expands Retail and Catering Options

    Hong Kong International Airport Expands Retail and Catering Options

    Nine retail shops and a café have opened in the recently-inaugurated 105,000-square-metre Midfield Concourse of Hong Kong International Airport (HKIA).

     In addition to the new shops, there are also outposts and a money-exchange kiosk.

    “The Midfield Concourse will be able to serve an additional 10 million annual passengers in order to meet the increasing passenger volume at HKIA,” said Cissy Chan, Executive Director, Commercial, Airport Authority Hong Kong. “We are proud to offer extended retail and catering options throughout the concourse, which will let the passengers have a pleasant and enjoyable last-minute shopping and dining experience.”

    Soon to be opened are eight retail and three catering outlets, including world-renowned travel retailer DFS, which will introduce a new multi-category store concept.

    The catering outlets will offer café and casual-dining options to departing passengers who have limited time before boarding.

     The Midfield Concourse also marks MX’s first entry to HKIA

  • More space, lower rents in Singapore

    More space, lower rents in Singapore

    More retail space is available in the city, with a slight dip in prices and a decrease in rental costs.

    Singapore retail vacancy rates rose to 7.2 per cent at the end of the fourth quarter last year from 7 per cent at the end of the third quarter, according to the Singapore Urban Redevelopment Authority.

    During the quarter, there was a 0.1 per cent dip in the prices of retail space, compared to a decrease of 0.3 per cent the previous quarter. Rental rates fell 1.3 per cent, following a 2 per cent drop in the third quarter.

    For the year overall, prices for retail space were down 0.8 per cent while rentals fell by 4.1 per cent.

    At the end of the fourth quarter, there were 808,000 sqm of retail space in projects in the pipeline.

    Occupied retail space grew 8000 sqm in the fourth quarter of last year, compared to a drop of 13,000 sqm in the previous quarter. In the same period, the stock of retail space increased by 22,000 sqm compared to a 24,000 sqm decrease.

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  • Bangkok retail market to increase more than 1 million sq.m.

    Bangkok retail market to increase more than 1 million sq.m.

    The entry of new local and international retailers, combined with a challenging economic outlook and weak consumer sentiment is all adding up to the mix.
    Despite a slowdown in retail sales, there is currently 1.1 million sq.m. of retail space under construction in Bangkok, which will bring the total completed supply in 2017 close to 8 million sq.m.
    Within the CBD, the latest major retail developments to open are EmQuartier and Central Embassy, intensifying competition for existing malls such as Siam Paragon, Gaysorn and CentralWorld.

    In addition, big developers continue to renovate their downtown retail centres such as Siam Discovery and MBK.

    Bangkok retail market, EmQuatier
    As the major retail centres are chasing after the same group of consumers, retail events and promotions have become ubiquitous

    As the major retail centres are chasing after the same group of consumers, retail events and promotions have  become ubiquitous leading to a cut-throat competition and heighted promotion campaigns, particularly gearing up to the festive season where consumer spending typically peaks.

    The expansion by major retail developers to suburban areas may also in part draw consumers away from CBD malls, although the impact may be limited.

    Bangkok’s suburban areas today are well served by quality retail centres, reducing the need for consumers to travel into the CBD.

    To the North, Zpell@Future Park has just opened on 27th November. Opened on the same day in Eastern Bangkok on Ekamai-Ram Intra is Central EastVille, adding competition to existing malls in the area such as Crystal Park and Crystal Design Centre.

    The Mall Group is also currently planning The Bangkok Mall on Bangna-Trad which is expected to be completed in 2017. To the West, CentralPlaza WestGate recently opened in August in the Bang Yai area, adding a major retail centre to an area where there have been limited retail developments.

    The Riverside will also get its own luxury shopping complex in 2017 with the opening of IconSiam which will comprise a 500,000 sq.m. retail and entertainment complex, part of which includes a 36,000 sq.m. 7-floor Takashimaya department store from Japan which will be Thailand’s first.Amidst this competition, the segment that will find most challenging is community malls.

    Community malls will be forced to adjust their strategies and have clear unique selling points and propositions to draw in consumers; otherwise they are likely to be overshadowed by major retail developments that have a bigger events and promotions budget.

    It is essential for community mall developers to understand their target consumers’ needs and retain anchor tenants in order to compete in the long-term.

    The plus side of the retail expansion is that it will create room for both domestic and international retailers to expand to suburban areas.

    International fashion brands such as H&M, Uniqlo, Aldo and Charles & Keith have already expanded to CentralPlaza WestGate.

  • Retail space in new Yangon theme park in hot demand

    Retail space in new Yangon theme park in hot demand

    A shopping centre due to open later this month in Yangon’s new Fun Valley Theme Park has been booked out by businesspeople hoping to capitalise on the amusement park’s popularity.

    The Kantharyar Shopping Centre will open on November 27 to include retail space, a supermarket, three cinemas, beauty salons and family KTV, said sales and marketing manager U Thet Htun Zaw.

    Of the 49 shops in the theme park, only two small spaces remain available for rent, he said, adding that retail space in the shopping centre is now fully booked.

    Phoo Pwint San Company opened the theme park in Yangon’s North Okkalapa township at the start of last month.

    Other than the outdated Happy World Amusement beside the People’s Park, this is the first theme park to open in Yangon and businesspeople are optimistic about its success.

    “I am very interested in opening a shop at Fun Valley,” said Ma Thae Su Win of War Sar Bi hot dog shop. “Children and adults alike love fast food.” However, she is unable to afford the rent, which must be paid a year in advance.

    Retail space costs K2000 to K4000 per square foot, depending on the location. Shops must hand over a year’s rent upfront, in addition to a deposit worth three months of rent.

    For now, entrance to the park is free, though fees of K500 to K1000 may be introduced later, said U Thet Htun Zaw. Rides cost between K1000 and K2000 and a water park will open soon.

    Since the park opened, it has had between 7000 and 8000 visitors, he said, adding that the company also has plans to open similar amusement parks in Mandalay and Taunggyi.

    “In North Okkalapa there are no good recreation options and some of the parks are not enjoyable to spend time in, so we decided to open the park here,” he said.

    “It’s aimed at both children and adults, and all of our games and rides are the latest editions.”

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