Despite slowing expansion, global retailers still see massive market potential in Beijing, Hong Kong, and Asia-Pacific overall, according to a new report by commercial real estate services firm CBRE. In a survey of more than 300 top international retailers in 61 countries and 191 cities, data revealed Hong Kong to be the top destination in 2015 for new market entrants, rising four places and beating Tokyo, which dropped from first to third place.
In its report titled “How Global is the Business of Retail?” 334 retailers were broken down into categories, with 54 retailers making up the luxury sector, which included men’s and women’s clothing and jewelry. The mid-range fashion category included 70 retailers. The data looked at cross-border retail overall, finding that the number of new entrants to cities around the globe rose 3.1 percent in 2015 compared to 2014. However, the rate of expansion among the retailers in the survey slowed, with only a 1.6 percent growth at city level and 2 percent at country level. CBRE attributes the slowdown to the fact that companies are putting more resources towards growing their e-commerce presence.
Last year, 73 brands launched in Hong Kong, while in Beijing, 37 brands opened shop, putting China’s capital city at number eight.
Countries in the Asia-Pacific region counted for four of the five most attractive markets for retailers that did expand, according to the survey. These countries were particularly attractive to brands in Europe, the Middle East, and Africa (EMEA)—70 percent of those surveyed from EMEA had a presence in Asia-Pacific. More than half of the brands entering new markets around the globe are European retailers, but retailers from the Americas have the biggest global outlook, with 87 percent of those surveyed having a presence in Asia-Pacific, EMEA, and the Americas. These brands also expanded their country footprint the most at 3.1 percent.
In mainland China, many international brands expanded to Beijing thanks to an increase in demand from shopping malls for differentiation. CBRE notes the trend here lies in the expansion of affordable luxury fashion brands as shopping malls begin to adjust their offerings. “The outflow of luxury sales–to Europe and Japan where consumers can exploit the price gaps–have propelled landlords to adjust their malls’ positioning from premium luxury to more aspirational-oriented brands,” CBRE says. While luxury brands are one of the top categories in terms of expansion, they’re shifting their focus to expanding in the Americas and EMEA as they grapple with China’s economic slowdown.
Retailers in Beijing are also seeing a 5 percent drop in vacancy in the city as developers and landlords give preference to F&B and children’s brands to fill new shopping spaces. The F&B retail category expanded the most globally, and about one-third of these brands expanded to Asia-Pacific.
Hong Kong’s performance in the report seems to contradict its ongoing battle with slumping luxury sales, with many brands closing shop or moving to Macau in hopes of reaching the massive Chinese market there. However, according to CBRE, lower rents and an eagerness from landlords to “introduce more new players to refresh their tenant mix” have given mid-range brands a chance to move in.
China continues to be in demand in terms of retailers looking to globalize, with 56.9 percent of retailers surveyed having a store there. This puts the country just behind the United Kingdom, which is “the most penetrated market by international retailers.” And while Beijing is seeing significant growth this year, Shanghai remains in the top spot in terms of presence of international brands—54.4 percent of brands surveyed were there, compared to 45 percent in Hong Kong.