HONG KONG: International expansion remains high on the agenda for retailers in 2015, despite uncertain economic prospects and cost escalation, and Hong Kong follows China as one of the most targeted markets in Asia Pacific for global retailers considering expansion.
According to a release from CBRE, based on its special report “How Active Are Retailers Globally,” the report 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.
China (28%) is in fourth place whilst 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.
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Joe Lin, Executive Director, Retail Services, CBRE Hong Kong, said, “Hong Kong is a key gateway city in Asia Pacific and we continue to see retailers looking to locate their first Asia store in the territory.
Despite this, retailers are becoming more cautious on expansion due to high occupancy costs and the weaker appetite for high-end products from mainland Chinese. Hong Kong is however, still one of the most profitable cities for retail business, and is regarded as a prime location for retail brands to raise their profile in Asia Pacific.”
Physical stores remain the destination of choice for consumers, and in recognition of this, retailers continue to open stores in diverse locations. Asia Pacific is one of the most popular regions globally for store openings, with 43% of retailers planning to open in the region by the end of the year.
Globally, 85% of Luxury & Business Fashion retailers are looking for expansion in Asia Pacific and 67% of Coffee & Restaurant retailers.
Jonathan Hsu, Head of Occupier Markets Research, CBRE Asia commented, “Given the ongoing challenges retailers face, from cost escalation, successful delivery of omni-channels, and 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 prohibitive, especially in prime areas due to the tight availability.”
Retailers are most concerned about cost escalation and unclear economic prospects. Joel Stephen, Head of Retailer Representation, CBRE Asia, commented, “Retailers will be selective in new openings in view of the rising costs of operation 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, large scale expansion plans with retailers looking to open more than 40 stores has scaled back to 5% in Asia Pacific, mainly dominated by strong F&B interest. However, in spite of this, appetite for international expansion remains a strong focus as retailers continue to invest in their store network throughout 2015.
