umber of metrics we might use to make this assessment: sales per square metre and occupancy rate are two that immediately come to mind. If the performance of retail space is out of kilter with respect to either or both of those (usually the two will go hand in hand) then we would probably conclude that there was too much retail space per person in that particular market. So where are Asian countries placed with respect to space per capita and how much more new retail space can be absorbed before we risk having too much? Current estimates There are many heroic estimates floating around out there for retail space per capita in various countries, and they are virtually all fraught with measurement problems. However, to get a ballpark idea of what is going on, we can start with a cross-country comparison using data from the International Council of Shopping Centers and Statista, which shows that by far the most mall space per head of population is in the US (23.5 sqfeet or 2.2sqm), followed by Canada (1.56 sqm) and Australia (1.04sqm). Then there is a big fall-off to Singapore (.53sqm), the UK (.43sqm), Japan (.41sqm), China (.26sqm), Taiwan (.22sqm), Thailand (.21sqm), South Korea (.20sqm) and Indonesia (.09)sqm. On a per capita basis then, the US has more than eight times the mall space of China and 10 times the space of Thailand. Over-malled or under-demolished? If a market is characterised by large pockets of weak or falling sales per square metre and high vacancy, and these issues are not due to a recession (or a pandemic), then it probably means there is too much retail space. However, this overcapacity may not mean that there is too much new space being built, too many new stores opened, or too many new malls. As one industry executive astutely observed a while back, “America isn’t over-malled, it’s under-demolished”. There is plenty of very good retail space in the US but a lot of bad stuff, too, much of which was built more than 20 years ago on the back of easy money, cheap land and a kind of Wild West development mentality. The bad stuff just needs to go away and be replaced with some other land use. If that could happen, then you would be left with a very vibrant industry and no one would be saying the country was over-retailed. Australia, Canada, and the UK are all developed countries that have retail obsolescence problems of their own but in their case the rot resides not in the shopping centres but in the High Streets and suburban strips that have, over a long period, had the oxygen pumped out of them by new malls. The UK, with its planning diktats, has tried valiantly to save its High Streets by limiting mall development and this accounts for its relatively low mall space per capita of .43sqm. Australia has generally been more laissez-faire about letting its suburban strips go belly up, with token efforts to preserve them now on their way out, like restrictions on trading hours at shopping centres. So what about Asia? China and India, two developing countries with relatively immature markets, have some of the same obsolescence problems as the US. There is a good reason for it: much of the first generation of modern retail was built not so much for profit as for self-aggrandisement. Massive malls were built by property developers with little knowledge of retail and in many cases not even any interest in it – often their background was in residential property. In India, the big malls had no retailers to go into them. In China, they were financed by cities that were in a competitive foot race with one another to be able to brag that they had the biggest mall, often with grotesque results. Consequently, what we have now in both countries is a lot of retail property that requires demolition. The newer stuff, built by professional retail developers, is among the very best in the world. And it’s these that provide a large portion of the real-estate platforms for the entry of international brands. Despite growing pains, the situation in developing Southeast Asia is much better: accomplished retail developers that are also retailers (for example Central and Siam Piwat in Thailand, Aeon in Vietnam, SM Prime and Ayala in the Philippines) have been responsible for much of the early development, and the quality is good. Most of the shopping centre stock has been developed in the e-commerce era so it has not had to re-tool so much, neither technologically nor in terms of tenant mix for the changes that have occurred in shopping behaviour. Is Japan the equivalent of Baby Bear’s porridge? So back to the question of how much retail space is right and how far have these developing Asian countries got to go before they hit a tipping point? Japan, at .41sqm per capita is a good reference point because it is a developed country with a very mature market and without much obsolete space, or at least nowhere near on the scale of the problem in US malls, UK High Streets or Australia’s suburban strips. Developing Asia cannot support the amount of retail that Japan can because there isn’t the spending power, so most of those countries probably need to be at a level of space per capita quite a bit lower. For example, Thailand’s space per capita, adjusted for income and also taking tourism into account should be less than half that of Japan’s, so it is already pushing toward the high side. Going forward, if the amount of retail space doesn’t adjust to population growth in Southeast Asia particularly, then there are going to be problems. Already there are signs of strain; for example, with the vacancy problem outside of Vietnam’s big city CBDs, where mall companies are now talking about getting more out of their existing assets instead of breaking ground on new ones. That’s good news: Asia’s mall developers are learning from America’s mistakes.