Explosive middle class growth and rapid urbanisation is providing a perfect storm for retail development across Asia, according to speakers and a report released at ICSC RECon Asia.
“We are about to see the biggest explosion ever of shopping in the next 10 years,” said Kishore Mahbubani, a dean at the Lee Kuan Yew School of Public Policy at the National University of Singapore. In 2009 Asia’s middle classes stood at 525 million, but will grow to 1.74 billion by 2020, according to the report, compiled by CBRE.
Retailers can also be cheered by the “torrent of people” moving from rural settings into cities, especially in China, Mahbubani and others noted. Some 60 per cent of China’s population will be urban by 2020, up from a little over 40 per cent in 2000. Steady urbanisation is taking place across the rest of Asia too and is particularly rapid in such places as Indonesia, where it stood about 38 per cent in 2000, but is projected to be over 60 per cent by 2020.
All these people need a place to shop, speakers noted. About 45 million sqft of new retail space was added across the Asia-Pacific region in the first three quarters of this year, taking the total to more than 700 million sqft, according to CBRE. About 220 million sqft of retail is under construction across Asia.
Again, China is seeing the bulk of this; it added 34 million sqft in the first three quarters. But Southeast Asia is also seeing rapid development. Bangkok, Kuala Lumpur, Manila, Jakarta and Singapore each added 1 million sqft during the same period.
People in the cities will be best served by smaller centers and supermarkets in their own neighborhoods, noted some speakers. In such congested cities as Jakarta, it can take hours for consumers to reach large modern shopping supermarkets.
“Our sweet spot is the neighborhood center,” said Shane Taylor, a Hong Kong–based director of Asia-Pacific strategy and research at CBRE.
Despite this, many local developers fall prey to the temptation to build large trophy centers that will not draw the customers needed to sustain them, said Jack Backen, director of International Property Economics at consulting firm Urbis.
But while much has been made of so-called overbuilding in China, this does not mean there is no place for new large malls in the future, noted Alvin Mah, chief investment officer at Alpha Investment Partners in Singapore. The widely reported-upon large empty ‘white elephant malls’ failed because they were poorly designed and poorly managed, not because large malls have no place in China, Mah noted.
Many of these empty behemoths are on valuable land, and developers are eager to get their hands on them so that the sites can be cleared and redeveloped with better centers, said Taylor. But prospective developers can be thwarted by tight government control over who does what, and where.
Another impediment to gaining control over such centers is that they are owned by their tenants, noted Morgan Parker, chairman of ICSC’s Asia Pacific Research Council. “How do you aggregate a mall that has 350 owners?”
But developers and retailers are not about to be daunted by such challenges in a region with such promise. According to Oxford Economics, over the next 10 years real GDP per capita in Asia Pacific will grow by more than 40 per cent, to over $8500.
China’s share of global gross national product will overtake that of the US next month and in 2020 it will be twice as large as America’s, said Mahbubani, a former ambassador for India to the United Nations.
“The next decade will be the best decade that Asia has seen in 300 years.”
Source insideretail.asia