Retail Markets

Retailer demand remains healthy in Greater China

Retail sales have recently been much stronger in China (12.6% year-on-year) and Hong Kong (15.8% year-on-year). Demand from retailers remains generally healthy in China, as requirements from mid-tier retailers and new-to-market foreign brands help to offset slower expansion by some existing luxury brands. Hong Kong continues to see robust demand from luxury brands and F&B operators for space in core locations.

Consumer confidence generally buoyant across Asia Pacific

Vacancy rates have been generally stable across the monitored markets in Asia, as most new developments have achieved good occupancy rates (albeit lower for some suburban malls in Shanghai and Singapore). Rental growth has been strongest in Jakarta (2.3% quarter-on-quarter), followed by Greater China - rents in Beijing have risen 1.7% quarter-on-quarter while growth in prime malls in Hong Kong has eased to 0.9% quarter-on-quarter. Average rents in Australia were broadly unchanged over the quarter. For 2013, retailer demand for space is likely to remain relatively robust in the majority of locations, and most are expected to see a further, though moderate, upswing in rents.

A more promising start to 2013 in the United States

Although there will continue to be headwinds throughout much of 2013, there are signs that the U.S. retail property market may soon turn a corner. Net absorption easily outstripped new supply during the quarter by nearly one million square metres. The overall vacancy rate continued its gradual decline, falling by another 10 basis points to 6.7% in Q1, but more promising was evidence of positive rent growth, with rental rates during the first quarter increasing by 0.3% quarter-on-quarter. Although marginally down year-on-year, there is now more confidence that rents have stopped losing ground and could begin to gain further positive traction later in 2013.

Among U.S. shopping centre types, malls continue to see the tightest overall market conditions, with total vacancy of 5.9%. Several markets, such as Miami, New York, Houston, Dallas, Fort Lauderdale and San Francisco, continue to stand out for their rental and occupancy outperformance, due to strong demographics and/or superior supply constraints.

Core European markets remain a priority for retailer

Consumer confidence remains well below the long-term average in most European countries and overall retail sales are unlikely to show any growth in 2013. Yet, despite a subdued outlook for retail sales, there are bright spots within positive growth projected for Russia, Turkey and the Nordics.

Core retail markets remain a priority for international retailers. At the same time, retailers also recognise the expansion opportunities provided by the region’s emerging markets, but are acting cautiously when opening new stores. New supply of prime retail space remains scarce, which is helping to maintain prime rents in most key European markets. During Q1, prime rents rose in the Nordic cities of Oslo (+3.0% quarter-on-quarter), Copenhagen (+2.5%) and Stockholm (+0.6%). Strong rental growth for prime unit shops is forecast in Moscow, London and the major German cities in 2013.

Circa 14.6 million square metres of new shopping mall space will be completed in Europe during 2013 and 2014, 40% of which will open in Russia and Turkey. Prime shopping mall rents across Europe remained stable over the quarter. Healthy increases in prime rents are forecast for Germany and Russia in 2013.