Housewares retailers expanded actively in Southeast Asia and Australia in the first quarter of 2015 due to the growing urban population and booming residential market a new CBRE report said on Tuesday.
Zara opened its first Zara Home store in Australia during the quarter with a second store set to open in Sydney later this year. Spotlight and HomePro reportedly plan to open more than 20 stores across Southeast Asia.
The report reveals that retail leasing activity in Asia-Pacific weakened further in the first quarter as retailers turned more cautious. However, F&B retailers continued to lead the demand during the quarter, with international fast food and confectionary stores particularly active in highly populated emerging markets.
Retailers in the region remained focused on securing space in well-managed core properties in prime locations of the best performing cities, according to the report. However, such space is in limited supply.
"The weaker leasing activity this quarter translated into an opportunity for ever-more budget conscious retailers to negotiate more tenant favourable commercial terms in fringe areas, although competition for space in core locations remained relatively strong.Conversely, with increasing vacancy pressure the market is beginning to become more challenging for landlords. We continue to see the more successful landlords being those that proactively invest in understanding consumer and tenant requirements and look to collaborate with tenants around marketing efforts in order to drive foot traffic," said Joel Stephen, Senior Director, Head of Retailer Representation, CBRE Asia.
The report also finds that the demand from luxury brands was subdued in Hong Kong and Mainland China due to the ongoing anti-corruption campaign and trend for Chinese tourists to purchase high-end goods in other markets such as Europe.
Fast fashion retailers continued to focus on expanding in relatively underpenetrated markets such as Australia and Taiwan. H&M opened first store in Taipei which generated sales revenue of USD4.8 million in its first two weeks of operation.
New retail supply in Asia-Pacific this quarter slowed to 4.8 million sq. ft., a significant decline on the 17 million sq. ft. of new stock completed the previous quarter.
"The remainder of 2015 is expected to see the completion of around 65 million sq. ft. of new retail supply, with Bangkok, Shenzhen, and Beijing contributing the majority of the space," says the report.
Although retail leasing activity weakened in the first quarter, regional rental growth continued to be supported by the strong performance of markets in Australia, particularly Melbourne, Sydney and Perth.
"We expect leasing activity to remain flat in the coming quarters, with the exception of Japan, Australia and Taiwan. Stock of prime retail space will remain limited but a large volume of new retail supply will be completed in decentralized locations. These factors combined with ongoing caution from retailers and limited expansionary demand will result in further moderation of rental growth over the course of 2015," said Jonathan Hsu, Head of Occupier Markets Research, CBRE Asia Pacific.
Hsu expected regional retail sales to remain largely stable in 2015, as fundamentals supporting retail, such as job growth, wage growth, and demographics, remain intact.