Retail in Asia


China dominates luxury retail openings in 2022, wider Asia region store numbers lift

China continued to dominate new store openings in 2022, according to the Savills Global Luxury Retail report, which also noted that the wider Asia region increased its global share of new store openings last year.

SEE ALSO: APAC retail outlook: Optimism grows despite rising costs

In 2022, there was an 11 percent increase in new store openings globally on the previous year. Much like in 2021, China continued to dominate, accounting for 41 percent of all new store openings, driven by brands’ continued focus on that market, particularly over the first half of the year, as Chinese luxury spend remained largely confined to its domestic market.

However, in quantum terms, China did witness a decline in new openings in 2022, compared to the acceleration in openings the year before and the weakening in occupier confidence in the face of the rolling lockdowns seen in some parts of China throughout last year, according to the Savills report.

In the wider Asia region, the global share of new store openings increased to 12 percent during 2022, on the back of a relatively fast recovery in luxury spend in the region, helped in part by the return of international visitors. A focus on relatively underserved markets with a growing HNW (high-net worth) population, such as Vietnam, also boosted luxury brand activity in the region, said Savills.

“China is still a very important market for luxury representing around 17% of global sales in 2022 according to Bain,” said Nick Bradstreet, head of Asia Pacific retail, Savills. “But, because of Covid and the tight regulations in China, alongside increasing challenges around profile and marketing for smaller and emerging luxury brands, many have come to realise that they need to diversify their portfolios and Southeast Asia is the natural choice for this diversification.”

These stand out Southeast Asia markets included Singapore, Thailand and Vietnam. The trio boast growing economies and expanding HNW populations, including a widening profile of luxury hotels and members clubs. As a result, a number of luxury retailers are focusing their attention on them with Vietnam, and to a lesser degree Thailand, very much in focus.

However, Blackman warned that the three markets do “suffer from a lack of suitable supply which is a challenge, albeit new development projects in Bangkok should alleviate supply pressures in this market over the coming years.”

Singapore, despite being a more mature market with many luxury players already having positions, still presents as an opportunity to new and upcoming names, particularly as Singapore’s retail sales have grown significantly over recent months. “But with very tight levels of supply there exists significant upward pressure on prime rents,” said Blackman.

“Hong Kong has historically been a key luxury market in the region, albeit its position and appeal has slipped somewhat in recent years due to falling visitor arrivals from mainland China,” he added.

The Savills report did say that this trend is expected to reverse in 2023, with the firm forecasting that numbers will return to pre-covid levels in 2024 (55 million visitors are expected to come to Hong Kong in 2024), resulting in a strong jump in sales.

Improving sales, and prime headline rents in key luxury locations remaining 10 percent below pre-Covid levels, means that for luxury brands not represented yet in Hong Kong, “now may be a good time to take a position,” concluded Blackman.