Asian cities dominate the latest retail destination rankings, with the Middle East taking most of the remaining spots.
According to the latest edition of JLL’s Destination Retail report, which ranks markets for retailer expansion around the world, Asia is fuelling global growth, taking 12 of the top 20 spots. Six of those cities are in China – but Singapore, Hong Kong and Macau are not among them. Six months ago Hong Kong was second only to London – neither city makes the list now.
This time around, the top two cities are Dubai and Shanghai, with Beijing ranking third. The other Asian cities in the top 20 are Bangkok, Chengdu, Kuala Lumpur, Jakarta, Manila, Tianjin, Shenyang, Shenzhen, Chongqing and Hangzhou. (The full list is below).
Besides Dubai, Abu Dhabi, Kuwait, Jeddah and Riyadh make the list, meaning 85 per cent of the top 20 destinations are in just two regions.
“The global retail landscape is expected to change significantly over the next 10 years, as a fast-growing middle class in emerging markets attracts retailers hungry for growth,” says David Zoba, chairman of JLL’s Global Retail Leasing Board.
JLL says Shanghai has become a favourite of international brands looking to test the Chinese market and gain exposure. While established prime markets include West Nanjing Rd and Huaihai Rd, new submarkets targeting local residents are popping up along the many new metro lines leading out of the city, and the city’s retail network is growing and shifting.
Beijing follows as the third-fastest-growing retail market with its swelling middle class and strong concentration of high-net-worth individuals. Properties such as China World Mall and the landmark project Taikoo Li continue to draw high-end shoppers, while malls like Beijing APM and Oriental Plaza dominate tourist-friendly shopping strip Wangfujing. The Chinese capital’s suburbs are also experiencing rapid growth as people choose to shop more locally rather than brave the traffic into the city centre.
“Emerging markets can expose international retailers to greater levels of economic and geopolitical risks. One pertinent example is China’s anti-corruption campaign and the knock-on effects on the luxury market,” says James Hawkey, head of retail for China, JLL. “However, international retailers are increasingly comfortable dealing with these risks, and generally have their eyes on the long term prize of establishing a strong position in major world markets.”
Added Zoba: “The search for growth is escalating the penetration of international brands across the world’s most attractive retail cities, especially in Asia. Retailers who succeed in acquiring the right space in the right place at the right time will benefit from successful, profitable growth, but they should be mindful that potential rewards go hand in hand with risk,” continues Mr Zoba.
Retail rents in these emerging markets reflect legislation, market transparency, reputational risk, maturity, as well as growth potential, meaning that their levels are relatively low compared to more mature markets. Places like Ho Chi Minh City, Jakarta and Bangalore present an opportunity for retailers to establish their brands at rents of less than US$2000 per square metre per year with projected in-store sales increasing by 8 to10 per cent until 2019, based on Oxford Economics forecasts. However, as cities mature and the pace of new construction of retail centres slows, rents will gradually increase.
JLL’s Destination Retail report 2016 examines the presence of 240 international retail brands across 140 retail cities, giving insights for international retail expansion. The 140 cities make up 36 percent of the world’s GDP, 13 per cent of the global population and 33 per cent of total consumer spending.
Top 20 Global Growth Cities for Retail
4 Kuwait City
5 Abu Dhabi
11 Kuala Lumpur
19 Mexico City