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China ‘still attractive’ to foreign retailers

China remains the key target for expanding retailers in Asia Pacific, global property advisor CBRE says.

In the latest edition of How Active are Retailers in Asia, CBRE reveals that 62 per cent of respondents plan to open a new store in China this year. This is well ahead of Vietnam, Hong Kong and Singapore, which rank equal second with 33 per cent of retailers planning new store openings in these markets.

“Despite slower economic growth, China continues to grow at a rapid pace and is luring international retailers looking to tap into booming consumer spending and a growing appetite for western fashion products and services,” said CBRE Director, Asia Pacific Research, Jonathan Hsu.

“Consumer sentiment remains the highest in the world and retail sales growth is expected to reach 13.4 per cent in 2014. Retailers continue to view this market as having significant upside potential as the government plans to further boost domestic consumption and double household income by 2020,” adds Hsu.

By city, retailers are displaying a strong preference for expansion in Greater China and Vietnam. Beijing and Shanghai – the cities where 30 per cent of China’s millionaires are based – top the list with 36 per cent of retailers planning to open stores in these locations this year.

Three cities in Vietnam also rank in the top 10 – highlighting growing retailer interest in South East Asia’s emerging economies, including Vietnam, Indonesia, the Philippines and Thailand, given their growing middle class, rising incomes and appetite for Western consumer goods.

“Vietnam has seen a steady flow of new overseas retailer entrants in recent years, including the likes of Starbucks and McDonald’s. This trend is expected to gather pace as other retailers position themselves to enter this market following the relaxation of foreign direct investment for wholly-owned businesses, which takes effect in 2015,” said Sebastian Skiff, executive director of CBRE Retail.

Half of the retailers surveyed rate current opportunities to expand as being ‘excellent’ or ‘good’, backed by the expectation that Asia Pacific will outperform other major economic regions in 2014 and that private consumption demand will continue to grow, albeit at a slower pace.

However, there was a significant divergence in the outlook for Asia versus Pacific, with 74 per cent anticipating good to excellent expansion opportunities but only 32 per cent expecting the same in the Pacific, CBRE says.

Skiff attributed the contrast to the relatively smaller market sizes of Australia and New Zealand. However, he said retailer attitudes were changing as leading global retailers, particularly those in the value fashion sectors, entered the Pacific market.

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