Emerging global cities entice retailers
0 CommentJLL’s Destination Retail report unveils top global growth markets for retailer expansions
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, according JLL’s Destination Retail report. But as companies seek out these pockets of economic growth and rising tourism, they should be mindful that potential rewards go hand and hand with risk.
“The search for growth is escalating the penetration of international brands across the world’s most attractive retail cities, especially in emerging markets. Retailers who succeed at acquiring the right space in the right place at the right time will benefit from successful, profitable growth. But the time is now to plan their strategy and start looking for space,” according to David Zoba, Chairman of JLL’s Global Retail Leasing Board.
The Destination Retail report tracked 140 key retail cities that account for 36 percent of the world’s GDP and for more than $15 trillion in consumer spending. Nine of the top 20 global retail cities were classified as growth markets, which is based on the number of international retailers present in each market including Dubai, Kuwait City, Riyadh, Jeddah and Abu Dhabi in the Middle East; Shanghai, Beijing and Bangkok in Asia; and Moscow in Europe. Some of the leaders in emerging markets include:
- Dubai ranks No. 4 globally in terms of international retailer presence. Tourism plays an important part of the government’s strategy to attract foreign money. Recent entrants include Apple and Charming Charlie. Shopping centers dominate the retail market, with The Dubai Mall and Mall of the Emirates drawing the most shoppers.
- Shanghai, which ranks No. 6, has become a favorite of international brands looking to test the Chinese market and gain brand exposure, sometimes bypassing Hong Kong. While the banks of Huangpu River and West Nanjing Road are the prime shopping areas, new sub-markets targeting local residents are popping up along metro lines leading out of the city.
- Jeddah’s location as gateway to Mecca and Medina, through which millions of pilgrims pass each year, has boosted its position to No. 12, a ranking it shares with Taipei and Riyadh. The government also is looking to increase tourism spending from pilgrims as well as business travelers.
- Meanwhile, in Riyadh, Saudi Arabia’s political, financial and administrative home, sales are projected to grow up to 7 percent annually until 2020. The city also is expected to benefit from new retail developments as well as from the government’s decision to allow 100 percent foreign ownership of retail businesses.
These markets offer significant opportunities for retail sector expansion and increasing retail sales fueled by growing populations, rapidly rising middle classes and surging urbanization. While these cities are well established shopping destinations in their own right, they do not yet offer retailers the transparency of more mature, established markets.
“Emerging markets can expose international retailers to greater levels of economic and geo-political risks. Recent examples include China’s anti-corruption campaign and the knock on effects on the luxury market and Russia’s ruble devaluation,” added James Hawkey, Head of Retail for China, JLL. “However, international retailers are increasingly comfortable dealing with these risks, and generally have their eye on the long term prize of establishing a strong position in major world markets.”
Emerging market rents may reflect legislation, market transparency, reputational risk, maturity, as well as growth potential. Although the retail markets in Dubai, Shanghai, Beijing and Kuwait City have transformed and are attracting many new brands, their prime rent levels are low compared to counterparts in global and mature markets, such as London and Miami.
“The early bird gets the worm, and right now many emerging markets like Ho Chi Minh City, Jakarta and Bangalore present an opportunity for retailers to establish their brands at rents less than $2,000 USD per square meter per year but with projected in store sales of 8-10 percent until 2019 based on Oxford Economics Forecasts. But as the cities mature and the pace of new construction of retail centers mitigates, rents are expected to increase,” added Anuj Puri, Chairman and Country Head of JLL India.
JLL’s new report, Destination Retail 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 percent of the global population and 33 percent of total consumer spending. In today’s increasingly global retail market, international expansion is becoming a focus for JLL retail clients, as they seek sustainable growth. To learn more, register to receive JLL’s full Destination Retail 2016 Report: http://bit.ly/DestinationGlobalLandingPage