International expansion remains high on the agenda for retailers in 2015, despite uncertain economic prospects and cost escalation. Hong Kong follows mainland China as one of the most targeted markets in Asia-Pacific for global retailers considering expansion, according to a new report from CBRE 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 percent of retailers planning to open a store there in 2015. China (28 percent) is in fourth place while Hong Kong ranks sixth with 22 percent 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.
"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," said Joe Lin, Executive Director, Retail Services, CBRE Hong Kong.
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 percent of retailers planning to open in the region by the end of the year. Globally, 85 percent of Luxury & Business Fashion retailers and 67 percent of Coffee & Restaurant retailers are looking for expansion in Asia-Pacific.
"Given the ongoing challenges retailers face, from cost escalation, successful delivery of omni-channels, and changes in consumer behaviour, 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," said Jonathan Hsu, Head of Occupier Markets Research, CBRE Asia.
Retailers are most concerned about cost escalation and unclear economic prospects. "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," said Joel Stephen, Head of Retailer Representation, CBRE Asia.
Overall, large scale expansion plans with retailers looking to open more than 40 stores has scaled back to 5 percent 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.