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Retail Intelligence | September 2014

Retail Cities in Asia PacificAre department stores an endangered species? Or are we entering a period of retail evolution...

“As Asia Pacific continues to witness rapid economic growth, raising living standards and driving retail demand; international retailers have set their sights on the region with ambitious expansion plans. Retailers and landlords are equally excited by JLL’s “A Magnet for Retail” report – tracking 100 retailers in 30 cities in AP and key expansion trends.”Tom Gaffney Head of Retail, JLL, Hong Kong

Visit our Retail Cities site to download A Magnet for Retail

03Retail Intelligence

Contents

06

10

23

04

08

22

Death of the department store

Retail expansion in Jakarta’s decentralised market

Fast Facts

Going direct: the rise of the flagship store in Japan

City Profiles

JLL Retail Team

10 Hong Kong

11 Beijing

12 Shanghai

13 Guangzhou

14 Tokyo15 Singapore16 Bangkok17 Jakarta18 Delhi19 Mumbai20 Sydney21 Melbourne

The ‘death’ of the department store?As global retailers continue their rapid expansion into Asia Pacific, and across the world, the big question is how the traditional department store, once the bedrock of shopping destinations, will survive in the face of changing competition. Will the large department store retailers in Asia face the same challenges as their Western counterparts, or does Asia’s unique consumer base offer a bounty of opportunities for department store growth?


Department stores in the West have undergone what is best described as an identity crisis. Forced to merge, close altogether, or completely re-invent themselves, it has become increasingly clear that consumer expectations are changing as online buyers keep clicking and shoppers are presented with more choice than ever before, especially in the fast fashion and cosmetics sectors.

Despite the department store’s challenges in the West, Adam Cook, Asia Pacific retail lead for JLL’s Project and Development Services argues that, in Asia, this type of retailer remains a go-to anchor tenant even in developed markets like Tokyo and Singapore despite declining revenues in the department store category. However, it will be interesting to see how Australian department stores, in particular, respond to the massive influx of foreign fast fashion brands that have entered the country this past year.

Australia’s two major department stores, Myer and David Jones, are certainly feeling the pinch following an influx of foreign retailers such as H&M, Zara and Uniqlo. Struggling against competition from online retail outlets, David Jones’ shareholders approved a multi-billion dollar takeover bid from South Africa’s Woolworths Holdings earlier this year.

However, elsewhere in the region, it’s a different story says Singapore-based Cook.

“Overall, the department store model continues to grow in Asia, predominantly due to new shopping centre properties that follow prescriptive tenant mix formulas particularly in the region’s emerging markets.”

A recent report from JLL – A Magnet for Retail – showed that Asia Pacific’s middle class population is expected to double to 1.32 billion by 2020, highlighting the region’s rapidly changing consumer base.

“Consumer spending in Vietnam alone is up 12% annually. The growing expendable wealth in these emerging markets is a real opportunity for both international and domestic retailers,” says Cook.

However, the region is yet to see the expansion of street-front shopping, or speciality retailer-anchored shopping centres that have gained popularity in the West. While some well-known retailers like Marks & Spencer feature their own private labels, traditional department stores are able to house a mix of globally recognised brands. More specifically, they deliver to the consumer a mix of private and independent labels, and can offer a great podium for new retailers to enter emerging markets through shop-in-shop programs.

“The Isetan Japanese department stores are able to bring in some reasonably high-end designers from time to time, which seems to work well. Specialty shops like the Vivienne Westwood boutique in Isetan’s Orchard Road store in Singapore offers shoppers exclusive access to top avant-garde couture design,” notes Cook.

Although the stock prices of most publicly traded department stores in the region have recently seen a slight decline, the department store remains an important element of the tenant mix in the growing numbers of new shopping centres under development in the region.

Middle and upper class shoppers in many Asian markets still favour the department store format, and tourism continues to drive sales.

“Japan-based retailer Isetan is expanding throughout Asia, as is Central, a Thai-based retailer, which supplements its core department store business with franchise brands like Muji and Nike…there’s still money to be made and the formula is still working,” says Cook.

Innovating to stay ahead

A key aspect of the department store evolution is negotiating the omni-channel pathway; with the explosion of online services and shopping, consumers want an “experience”, and a holistic one at that.

“Retailers must unite the platform, so that there’s a similar experience and brand voice, no matter what channel the consumer is shopping in,” Cook says.

He believes Asia Pacific will take the US’ lead and innovate its department stores by creating signature offerings, citing US department store Macy’s as a prime example of successful online, mobile, and brick and mortar platform.

“They are regularly heralded for pioneering integration of store operations and omni-channels,” he says.

Last year, JLL facilitated a 700 store-in-store partnership for Macy’s with high-end athletic shoe and apparel retailer, Finish Line.

The deal saw Finish Line become the exclusive athletic footwear partner of the department store chain—a move that executives think could increase annual revenue by as much as 30 percent. Macy’s benefits with the buying, inventory and supply chain expertise of Finish Line staff, while the partnership allows Finish Line to grow sales and access a new demographic of shoppers without opening new stores.

Similarly Nordstrom made the bold move in the last year to re-organise both the in-store and e-commerce channels to report to a single individual in charge of all sales functions.

Summing up, Cook argues that, while the formula is working at the moment, Asian department store operators lack the e-commerce and mobile platforms that exist in the West and will need to adapt to maintain growth.

“Developing these platforms and learning to partner with online retail giants like Alibaba Group in China are the critical next steps for department stores to maintain and grow customer bases across the Asia Pacific marketplace. Department stores may have some challenges ahead, and will need to beg, borrow and steal survival strategies, but they aren’t dead yet.”

“Department stores may have some challenges ahead, and will need

to beg, borrow and steal survival strategies, but they aren’t dead yet.”

Adam Cook, AP Retail Lead, PDS

Going direct: the rise of the flagship store in JapanMore and more brands are diversifying their retail strategy in Japan and realising the benefits of opening a flagship store. Are department stores keeping up with this pace of change or will they slowly fade into antiquity much like their Western counterparts?


Stationed behind a sleek marbled-granite reception desk, four perfectly manicured women in identical bowler hats sing a chorus of “iraashaimase” (Japanese for welcome) to customers. The latticed gold and silver backdrop behind them, arranged like hundreds of ribbons, reminds shoppers that they are here to spend money, and lots of it. A little further into the store, chic mannequins adorn brightly patterned polka dot kimonos, artfully arranged under a faux-firework display. From the interiors to the service assistants and everything in between, the flagship Mitsukoshi department store in downtown Ginza oozes glamour and prestige.

Yet, in this age of fast fashion and borderless shopping, this one-time symbol of modernity appears comparatively dated. Department store sales have shrunk 35 percent over the last decade and latest forecasts indicate that this downward trend is likely to spiral further. While department stores have always been central to the retail ecosystem in Japan, is it at risk of becoming an endangered species in the next few years?

Historically, department stores have represented the most secure route for new-to-market brands to break into the Japanese market. Selling a product in Isetan, Mitsukoshi or Takashimaya (among others) allowed brands to swiftly gain visibility in prime retail areas, and tap into an existing database of affluent shoppers as well as gaisho clientele (a personal shopper service unique to Japan).

Many department stores, such as Tobu, Tokyu and Odakyu, are also owned by private railway operators. By building stores directly adjacent to railway terminals, they secure staggering foot traffic characteristic of downtown commuter Tokyo. For example, Shinjuku is serviced by 12 railway lines and attracts almost 3 million passengers per day.

In the last few years, brands have slowly started moving towards direct retailing to gain greater control over their sales and operations. Luxury retailers in particular, have found success locating their flagship stores near department stores in order to attract high spending customers. For 2014 year-to-date, there have already been 26 new flagship store openings in the central Tokyo area, including new-to-market brands such as Balenciaga, Alice + Olivia and MCM.

The government’s 2020 tourism target of 20 million international visitors has also played an indirect role in the shift towards direct retailing. Relaxed visa rules has increased visitors from neighbouring Asia and

influenced the overall retailer profile in shopping precincts. Changing demographics will also see a rise in younger clientele who desire a different kind of retail experience. For example, luxury retailers such as Gucci and Valentino offer top clientele an enviable array of exclusive benefits, including invite-only events, VIP showings and the chance to purchase sought-after products before they hit stores.

That’s not to say that department stores have lost their appeal to brands altogether.

In specific shopping areas such as Isetan in Shinjuku and Mitsukoshi’s branches in Ginza and Nihonbashi, stores are boasting especially high revenue sales when it comes to luxury goods (8 percent increase y-o-y), though this is nowhere near the overall revenue they were posting 10 years ago.

The lesson to be learned here is that consumers are expecting more from their shopping experience and it is not the strongest or the fastest that will survive, but the ones most adaptable to change.

“Historically, department stores have represented the most secure route

for new-to-market brands to break into the Japanese market. Selling

a product in Isetan, Mitsukoshi or Takashimaya (among others) allowed brands to swiftly gain visibility in prime retail areas,

and tap into an existing database of affluent shoppers.”

Retail expansion in Jakarta’s decentralised marketsThe Indonesian capital has witnessed sustained growth in retailing across all sectors of the market with brands now turning their attention to emerging areas beyond the CBD. By James Austen


Indonesia’s retail sector is taking positive steps towards mature status, and the main driving force is the expansion of consumer activity in the nation’s capital, Jakarta. Although worsening traffic issues remain a constant challenge for downtown shoppers, its impressive malls offer a coveted mix of high-end luxury, mid-range fashion, restaurants and familiar cafe brands.

Jakarta’s best shopping centres enjoy impressive occupancy rates, which currently average around 93%, but retailer expansion sentiment has softened in the past 12 months, and the CBD retail market has slowed from the blistering pace of growth that prevailed during the past five years.

One reason that occupancy remains high have been the limits placed on new projects. In 2012, the government implemented the so-called ‘mall moratorium’, a cooling measure that froze the issuance of licenses to build shopping malls in central Jakarta. The moratorium created a shortage of new supply of retail space in the CBD and has begun to push up rents.

In addition to rent increases and intensified competition for prime locations, a combination of factors is encouraging retailers to re-focus their Jakarta development strategies. These include mall construction delays, late handovers and postponed mall openings that impact the planning of capital expenditure throughout the year. The depreciation of the rupiah, which has declined by almost 25% against the US dollar in the past year, along with softening retail sales have also caused retailers to reassess their expansion plans.

A renewed focus is being placed on developing and upgrading existing stores in downtown Jakarta to maximise productivity, rather than pursuing the previous approach of opening store clusters in the search for increased revenues.

Another outcome of the mall moratorium in central Jakarta has been the gaining momentum of retail growth in peripheral districts of the capital, especially Bekasi in the east, Sentul and Bogor in the south and Puri Indah to the west, where smart new malls are being developed. These pull factors are convincing ambitious retailers to head for the suburbs.

The move towards retail brand decentralised has been supported by the migration of the middle class consumers who seek a better quality of life by residing in peripheral areas beyond the crowds and traffic congestion of the CBD. With land, housing and condominium prices soaring across Jakarta, these outer residential districts appeal to small families, first-time buyers and young couples. The attraction is enhanced by improved transport connectivity, with new toll roads and main arterial roads linking the CBD and peripheral areas.

Whilst decentralisation is an irreversible trend, brand positioning and visibility remain important in an evolving retail landscape like Jakarta. However, the lack of space means that new-to-market brands are finding it difficult to establish themselves in the prime CBD locations before expanding elsewhere in the capital and to other Indonesian cities. This has raised a much-debated question about whether new brands can successfully open flagship stores on the fringes of a major city.

Experience across Asia has helped new-to-market brands to develop a more holistic market view. Urbanisation trends in other countries have instilled the realisation that detailed knowledge is essential in regards to the retail trends and patterns of demand beyond the high-profile downtown areas.

To fulfill their 5-10 year expansion plan, new-to-market brands need to look further afield for locations. Although long-term growth prospects are attractive, Indonesia’s retail sector remains complex and difficult to navigate. A calculated approach will deploy a range of due diligence techniques to better understand peripheral markets whose dynamism is fueled by migrating populations and shifting demographics, rising spending power and frequent changes in brand awareness and the perception of new products and services.

For domestic and established retail brands, Jakarta’s new retail markets are blooming at an opportune time, and provide important vehicles for the next phases of expansion. However, access to the CBD for new-to-market brands to establish a flagship store is still a dominant issue. As the importance of image and brand positioning further evolve, and occupancy rates in Jakarta’s CBD remain at saturation point, entering and expanding in this promising market remain challenging.

“Whilst decentralisation is an irreversible trend, brand positioning

and visibility remain important in an evolving retail landscape like Jakarta. However, the lack of space means that

new-to-market brands are finding it difficult to establish themselves

in the prime CBD locations before expanding elsewhere in the capital

and to other Indonesian cities. This has raised a much-debated question

about whether new brands can successfully open flagship stores on

the fringes of a major city. ”James Austen

JLL Jakarta

10 Retail Intelligence

Hong KongHong Kong is a dynamic world-class shopping destination. International fashion stores, luxury brand flagships and innovative food and beverage outlets compete for prestige sites that attract high-spending locals and visitors, particularly from Mainland China. Shopping hotspots include the impressive Pacific Place, Harbour City, Times Square, The Landmark and ifc, plus the coveted street-front stores along Queen’s Road Central and Canton Road in Tsimshatsui. Ongoing demand for retail space has resulted in several brands hot-footing into noncore shopping areas, such as Shatin, Tuen Mun and Tsuen Wan.

Marks & Spencer – 500 sqm, 32 Hollywood Road, CentralFolli Follie – 70 sqm, New Henry House, CentralSamsung – 600 sqm, 33 Des Voeux Road Central, CentralPhilipp Plein – 100 sqm, Entertainment Building, CentralJamie’s Italian – 1,600 sqm, Midtown, Causeway BayIntimissimi – 170 sqm, Metro City Plaza II, Tseung Kwan OSiemens – 300 sqm, Club Lusitano, CentralLush Cosmetics – 200 sqm, 68 Sai Yeung Choi Street South, MongkokPrivate Shop – 130 sqm, Hysan Avenue, Causeway BayAmerican Eagle Outfitters – 230 sqm, Times Square, Causeway BayLevi’s – 100 sqm, Olympia Plaza, North PointSunglass Hut – 35 sqm, 15 Pak Sha Road, Causeway Bay

Retail sales retreat

The retail sector continued to show signs of a slowdown

with total retail sales retreating approx. 7% y-o-y in 2Q14. The

decline was led by a 31.5% y-o-y drop in the sales of jewellery and watches.

Demand for prime locations remains strong

Despite declining sales, leasing demand in prime

shopping locations remained largely intact. There were no

new prime project completions in 2Q14.

Investment market activity picks up

Activity in the investment market recorded a surprising

pick-up with investors showing interest in larger size premises

with value-add potential in non-core locations.

Tourism still key driver of Hong Kong retail market

The changing profile and spending patterns of Mainland

Chinese tourists also contributed to the slower sales growth, with more same-day (lower spend) tourists visiting the city. The possibility of the government

imposing a quota on visitors from Mainland China has the potential to affect the market negatively.

HK springboard for mass-market retailers into

China

International retailers, especially mass market

retailers, remain keen on using Hong Kong as a springboard

to enter the Mainland markets. Against this backdrop, rentals are forecasted to increase up

to 1 – 2% this year.

-6.9%Retail sales growth (June 2014, y-o-y)

2.4 mil sqmPrime retail centre

stock

+9%New supply forecast

(2014 – 2018)

3.2%Rental growth

(y-o-y)Rental value

(psf pm)

FAST FACTS

2Q 2014 HIGHLIGHTS

Note: Hong Kong Retail refers to Hong Kong’s Overall Prime Shopping Centre and High Street retail markets.

HKD 173

Ba&sh CallixtoEtro J Crew (Men’s collection)J Crew (Women’s collection)Le 16 AoûtLe Labo Nature RepublicOyshoPhilipp PleinPorroPretty Ballerinas Scotch & SodaStuart WeitzmanTopmanVolcom

NEW RETAILERS

NOTABLE LEASING DEALS IN 1H14

Overall Prime Shopping Centres net, on LFA


BeijingThe Chinese capital has emerged as a sophisticated retail centre since its pre-2008 Olympic urban makeover. Developers created several mixed-use developments featuring contemporary malls in a city once famed for its open-air markets. Today, Beijing is a coveted location for international retailers, with glitzy venues like Oriental Plaza, China World Mall and Shin Kong Place appealing to both brands and shoppers. Designer boutiques plus high-end dining and entertainment draw a hip, fashion-conscious clientele to Taikoo Li Sanlitun and Parkview Green, while Indigo in Jiuxianqiao, Solana in the Third Embassy Area and Wangfujing Street are popular with families.

F&B chains expand rapidly

F&B operators targeting the mid-range market continue to drive demand for retail space

in Beijing with Grandma’s Home, Nanjing Dapaidang, Nan

Xiao Guan and Pizza Express opening outlets in 2Q14.

Rents rise in top performing centres

International apparel retailers remain highly selective in terms of location and are keen to open

their first stores in Beijing’s key locations – evidenced by

Dickies, Simonetta and Chrome Hearts. Urban ground floor

open-market rents increased 1.9% q-o-q on a chain-linked basis with higher increases recorded in top performing

properties.

Renewed emphasis on affordable luxury

Several luxury malls, including Seasons Place, Jinbao Place and China Central Place are

showing renewed emphasis on affordable luxury brands and attempting to increase F&B

and services portions.

Super-regional malls the next big thing

The next 12 months are the beginning of a supply wave

of super-regional malls in the suburban areas of Beijing,

such as Inter IKEA, following the growth of the urban rail

network.

Retail to office conversion trend continues

The trend of converting retail space into office continued in 2Q14. Wangjing International Centre closed its 20,000 sqm anchor, Yokado Department

Store, and converted the space into offices for strata

title sale.

Issey Miyake – 90 sqm, China World Mall

10.4%Retail sales growth (June 2014, y-o-y)


stock


(2014 – 2018)

8.4%Rental growth

(y-o-y)

RMB 1,281

Rental value (psm pm)

FAST FACTS

Note: Beijing Retail refers to Beijing’s Urban Prime retail market.

Chrome HeartsDickiesGusellaH&M HomeMadame TussaudsNan Xiao GuanNew LookPizzaExpressSimonetta

NEW RETAILERS

2Q 2014 HIGHLIGHTS

Core Prime Shopping Centresnet effective, on NLA



H&M opens flagship store

Fast fashion tenants remained active in Shanghai, with H&M opening their largest flagship

store occupying 3,500 sqm of space over four floors in

Mosaic on East Nanjing Road.

Vacancy increases as projects transition

One core project closed for renovation, and two non-core

projects opened in 2Q14. Vacancy increased to 8.3% in the core area as several large tenants vacated space. In the

non-core market, vacancy increased to 6.8% due to the

new projects opening.

Shanghai’s largest mall opens

River Mall, located at the Expo Site in Pudong held its grand

opening in April and is the largest mall in Shanghai with a GFA of over 330,000 sqm. The

project stretches 1.1 km in total and features a rooftop zoo with

exotic animals.

Retailers adjust strategies in line with consumer

preferenceF&B operators are shrinking the size of individual stores

and focusing on more casual dining to align themselves with

consumer preferences.

Rent rises in core and non-core areas

In the core area, open-market ground floor base rents

increased 0.8% q-o-q to RMB 51.7 per sqm per day. Non-core

rents rose by 3.9% q-o-q to RMB 17.3 per sqm per day.

Note: Shanghai Retail refers to Shanghai’s Overall Prime retail market.



stock


(2014 – 2018)

4.6%Rental growth

(y-o-y)Rental value (psm per day)

FAST FACTS

ShanghaiChina’s boldest, brashest metropolis boasts the nation’s most exciting retail mix. Sophisticated shopping resides on both banks of the Huangpu River that bifurcates this east coast metropolis. In downtown Puxi, international and local brands vie for prime storefronts on Nanjing Road and Huaihai Road, and in smart malls including Plaza 66, Réel, Hong Kong Plaza, L’Avenue and the art themed K11. Luxury brand flagships are a feature of Xintiandi district and the restored heritage mansions hugging the riverfront Bund. In Pudong, ifc mall and Superbrand Mall in the riverside Lujiazui district and Kerry Parkside all offer upscale shopping and a classy range of dining.

Starbucks – 289 sqm, Heng Shan FangTwosome Coffee – 419 sqm, Wheelock SquareTwosome Coffee – 190 sqm, Jia HotelNature Republic – 100 sqm, In PointDunkin’ Donuts & Carl’s Jr. – 430 sqm, Jing’An ParkForever 21 – 4,330 sqm, 900 Huaihai RoadPoutien – 425 sqm, The PlaceZoo Cafe – 235 sqm, In PointKingsport – 1,484 sqm, Westgate MallChao Tang – 272 sqm, Plaza 66Top Sports – 1,500 sqm, The Place

RMB 52

Abercrombie & FitchIsabel MarantIstaStyleM&MMaria Luisa SelectionMillions of MilkshakesNew LookOld NavyZapaZilli

NEW RETAILERS

2Q 2014 HIGHLIGHTS

Prime Shopping Centresnet, on NLA



GuangzhouChina’s southern megacity continues to benefit from ongoing urban redevelopment catalysed by hosting the 2010 Asian Games. Upgraded city infrastructure includes state-of-the-art new malls in prime areas. The emerging Zhujiang New Town district beside the Pearl River entices global and local retailers because of its luxury hotels, offices, dining and entertainment. The Mall of the World, Guangzhou’s largest subterranean mall, opened in 2013. Rock Square in Haizhu district is a commercial and residential property with a large shopping mall, and TaiKoo Hui in the Tianhe CBD is a mixed-use development featuring a shopping mall, office towers and a luxury hotel.

Fast fashion and F&B retailers most active

Given concerns about economic growth, most retailers were diligent

about selecting new store locations – fast fashion and

F&B continued to be the most active.

Zengcheng district’s first prime retail property opens

Zengcheng Wanda Plaza (130,000 sqm, GFA) opened in

2Q14 with full occupancy. This is the first prime retail property in the Zengcheng district. This puts Guangzhou’s total prime retail stock at 1.1 million sqm

NLA.

Downward pressure on capital values

A weakening residential market increased cash

flow pressures for many developers, leading some to put retail assets in non-core

areas up for sale. Coupled with softening rental growth, these

factors exerted downward pressure on capital values which experienced a 0.5%

q-o-q decline.

Weak demand to continue

Slowing economic growth and competition from e-commerce are likely to depress expansion

demand and tighten rental budgets. Key demand will

continue to come from fast fashion and F&B retailers –

however expansion plans will focus on established core

shopping areas.

Mid-tier malls for emerging submarkets

New supply is expected to reach 410,000 sqm (GFA) over the next 12 months, with most new projects being developed as regional malls targeting the mid-tier market. Considering

expectations for softer demand and a glut of new

supply, rental growth in most malls is expected to be flat.

FAST FACTS



stock


(2014 – 2018)

4.2%Rental growth

(y-o-y)

RMB 396

Rental value (psm pm, GFA)

Note: Guangzhou Retail refers to Guangzhou’s Overall Prime retail market.

H&M – 3,000 sqm, Peace World PlazaCalifornia Fitness – 2,200 sqm, Peace World PlazaSociete Generale – 552 sqm, International Finance CenterNew Balance – 2,000 sqm, Seasons Mall

AshAshworth Din Tai FungFreshFurlaSalad – Jeans

NEW RETAILERS

2Q 2014 HIGHLIGHTS

Overall Prime Shopping Centres net, on GFA



TokyoShopping in the Japanese capital is a dazzling, stylish and cutting edge experience. Tokyo’s vast size means its retail landscape is subdivided into distinctive districts, each featuring a compelling blend of marquee malls, department stores and classy boutiques created by top-name designers. Ginza is a refined area where chic brand stores reside alongside art galleries and high-society cafes. Young consumers make for the trendy malls, en vogue fashions and outdoor video imagery of Omotesando, Shibuya and Shinjuku, while Tokyo Bay’s large shopping mall appeals to families. Roppongi’s HQ offices and deluxe hotels are more than matched by Roppongi Hills, one of Tokyo’s sleekest shopping centres.

FAST FACTS

-1.5%Retail sales growth (June 2014, y-o-y)

n/aPrime retail centre

stock

n/aNew supply forecast

(2014 – 2018)

3.7%Rental growth

(y-o-y)Rental value

(per tsubo pm)

JPY 68,336

Sustained retailer demand despite a sales tax hike

A consumption tax increase implemented in April saw sales of large retail stores

in April-May decrease 4.9% y-o-y, while sales of luxury goods in department stores declined 32.5% y-o-y for the

same period.

Growth in rentals and consumer confidence

Rents averaged JPY 68,336 per tsubo per month in

2Q13, increasing 2.4% q-o-q and 3.7% y-o-y. Consumer

confidence rose month-on-month in May for the first time

since December.

Capital value growth outpaces rents

Rental growth accelerated in the quarter, marking the seventh consecutive quarter of increase. Capital values trended higher for the third straight quarter rising

9.1% y-o-y.

International retailers drawn to high streets

Kate Spade New York and Weekend Max Mara opened

on secondary high streets while Apple and Givenchy opened new stores in the

Omotesando area.

Visitor arrivals expected to increase

The number of visitor arrivals are expected to continue to grow, given the relaxation of travel visas for a number of

countries in the past year and the depreciation of the yen.

Note: Tokyo Retail refers to Tokyo’s Ginza and Omotesando Prime retail markets.

Doc Popcorn Magnolia BakeryNikeLabPop! Gourmet PopcornZara Home

NEW RETAILERS

2Q 2014 HIGHLIGHTS

Ginza & Omotesando Prime Street Shop

gross, on NLA


Balenciaga – 380 sqm, TS Aoyama Building, Omotesando Mcm – 290 sqm, Jujiya Building, Ginza Iwc – 55 sqm, Iwatsuki Building, Ginza Givenchy – 390 sqm, One Omotesando, Omotesando Apple – Apple Store Omotesando, Omotesando Alexander McQueen – 390 sqm, TS Aoyama Building, OmotesandoCole Haan – 155 sqm, Bunshodo Building, Ginza


Leasing interest sustained despite declining retail

sales Despite weak retail sales and

slowing visitor arrivals in 1H14, retailers continued to show

interest in prime space which supported leasing demand.

Visitor arrivals continue to decrease

Visitor arrivals have decreased 5.2% y-o-y in 1H14, mainly due to a sharp decline in Chinese visitor numbers which have

been declining since October of last year. Based on 2013

data, mainland Chinese were the second-largest

international visitor group to Singapore, after Indonesians.

Capital values stabilise but sales transaction volumes

plummet y-o-yCapital values remained stable in 2Q14, as strata-titled retail

transaction volumes increased marginally. 139 units were

transacted in 2Q, which is a 31% increase on 1Q. However transaction volumes dropped

by 70% y-o-y.

Rents grow marginally island wide

Rents grew marginally island wide in 2Q14, supported

by healthy leasing activity particularly in new malls,

although continued increases in business costs and labour

constraints are putting a strain on operators who are becoming more cautious in

their choice of locations.

Foreign dependency ratios continue to affect retail

businessesThe lowering of foreign

dependency ratios is expected to continue affecting retail and F&B businesses and may potentially have a negative impact in the

longer term. The Total Debt Servicing Ratio framework

may continue to discourage investors, as potential buyers

remain cautious due to sluggish retail sales and the growing

e-commerce market.

Note: Singapore Retail refers to Singapore’s Prime, Suburban and Marina retail markets.

SingaporeSingaporeans love to shop, and strong domestic purchasing power plus a magnetic appeal for Asian shopping tourists combine to create a comparatively mature retail market. The premier retail destination is Orchard Road, where cutting-edge malls such as Ion Orchard, Wisma Atria, Ngee Ann City, Paragon, and Scotts Square feature top-name global brands. Beyond downtown, the redevelopment of Marina Bay has delivered The Shoppes at Marina Bay Sands, a smart mall offering deluxe boutiques and emerging labels, while Suntec City Mall was recently renovated and extended. Retailers are also moving into decentralised areas such as JEM Mall and Westgate in Jurong East.

FAST FACTS



stock


(2014 – 2018)

0.5%Rental growth

(y-o-y)

SGD

38Rental value

(psf pm)

Boggi – 250 sqm, The Shoppes at Marina Bay SandsVilebrequin – 50 sqm, The Shoppes at Marina Bay SandsBen’s Cookies – 30 sqm, Wisma AtriaSmoothie King – 100 sqm, SportsHub Alt Pizza Bar – 150 sqm, Suntec City Artisan Boulangerie Compagnie – 150 sqm, 112 KatongAlice + Olivia

Bath & BodyworksBoggiEtro GivenchyKurt Geiger LatulleMM6 Proenza SchoulerPuduSandroSuitsupplyUnder ArmourVilebrequinWhole9Yards

NEW RETAILERS

2Q 2014 HIGHLIGHTS

Orchard Road Prime Shopping Centres

gross, on NLA



BangkokThailand’s capital is an increasingly hip shopping destination. Brand-hungry shoppers from home and abroad jump on the Skytrain and head for the city centre’s modish malls like Siam Paragon, Siam Centre, Emporium, CentralWorld and Terminal 21, or take a more leisurely stroll around Asiatique the Riverfront mall and night bazaar beside the iconic Chao Phraya River. Following the recent opening of Central Embassy and Siam Square One, Bangkok’s retail landscape continues to grow with a number of high profile malls scheduled to open in the second half of 2014 and early 2015.

FAST FACTS

-6.2% 2.6 mil sqm +31%New supply forecast

(2014 – 2018)

-0.8%Rental value

(psf pm)

THB 2,256

American Rag CieChickaliciousCicchettiCrumplerEmack & Bolio’sFauchonIsabel MarantJil SanderJohn VarvatosKurt GeigerMcQNapp JeansNiche NationNitrogeniePaulPretty BallerinasProenza Schouler

Red ValentinoRepettoRoberto CavalliScotch & SodaSoullandTeuscherTomsTruefitt & Hill

Bangkok’s magnetic effect on international retailers

Many international brands opened their first stores in Thailand in 2Q14. Five new fashion brands, one beauty

and cosmetic brand and Embassy Diplomat Screens (an ultra-luxury cinema) opened at Central Embassy. CentralWorld

became home to Fauchon – an internationally renowned French restaurant and pastry

shop.

Vacancy increases yet demand remains strong

Demand for prime grade retail space remained strong in 2Q14

with Central Embassy and Siam Square One opening and adding 73,600 sqm of stock to the market. Despite notable pre-commitment levels, the vacancy rate increased by

0.3% q-o-q.

Gross rents rise after political unrest settles

Landlords responded to the calming effect of the military

coup with a slight uplift in rents (rents had been temporarily lowered for those affected

by political demonstrations). Average gross rents increased

3.6% q-o-q and net effective rents increased by 3.9% in

2Q14.

Capital values grow in line with rentals

Capital values were also affected by the return to

political stability and rose by 3.5% q-o-q to THB 165,980 per sqm, reflecting strong

investment interest in retail property. Market yields

expanded slightly by 0.1% q-o-q to 12.7%.

Consumer confidence returns and tourism is expected to rebound

Thai consumer confidence has risen and the number of international tourists to

Bangkok is expected to recover soon. Demand for

prime space should continue to rise, in turn driving up rents

and capital values. Three projects totalling 218,000 sqm (NLA) of prime grade space is scheduled to complete in the

second half of this year.

Note: Bangkok Retail refers to Bangkok’s Prime retail market.

NEW RETAILERS

2Q 2014 HIGHLIGHTS

Overall Prime Shopping Centresgross, on NLA

Retail sales growth (June 2014, y-o-y)

Prime retail centre stock

Rental growth (y-o-y)



JakartaIndonesia’s fast-developing capital city boasts a rapidly diversifying retail market. Global brands are using Jakarta as a base to expand and tap into rising urban incomes and changing patterns of consumer behaviour across Southeast Asia’s largest country. Downtown Jakarta’s smartest malls include Plaza Indonesia, Grand Indonesia, Plaza Senayan and Pacific Place, all offering a colourful collection of fashion retail, luxury brands and dining.

FAST FACTS

6.4%Retail sales growth

(May 2014, y-o-y)

1.4 mil sqm +25% 3.4%Rental growth

(y-o-y)

IDR 5,303,545

Rental value (psf pm)

Retail demand rebounds

After a challenging 1Q14, when net take-up plunged to a record low, retail demand

rebounded supported by restored retailer confidence.

Despite a tough business environment due to the impact of the US dollar appreciation

and high interest rates, retailers expanded their store

networks.

International retailers support occupancy

CBD malls saw an increase in occupancy levels with the

opening of new outlets by both local and international retailers. Major leases were

taken by H&M in Grand Indonesia Shopping Town and Tiffany & Co in Plaza Senayan.

Limited supply due to government provisions

Total prime retail stock remained at 1.37 million sqm with no completions in 2Q14. The St Moritz shopping mall (est. 130,000 sqm) is the only

project expected to enter the market this year. Supply

growth has been limited in the past few years due to tight

provisions implemented by the Jakarta provincial government.

Demand for luxury set to increase

Higher incomes and improving lifestyles are likely to generate demand for quality and luxury

retail products. This trend is expected to entice more

foreign retailers to expand into Jakarta.

Fierce competition among landlords

Despite a rebound in occupancy levels, tight

competition among landlords continued to put downward

pressure on rents. No landlords increased rents in 2Q14. While tenants focus on revenue generation and minimising costs, landlords are focused on maintaining

occupancy levels.

Note: Jakarta Retail refers to Jakarta’s Overall Prime retail market.

Caviste Wine Lounge – 383 sqm, Tamansari Hive, JakartaAce Hardware – 2,200 sqm, Malang City Point, MalangStarbucks – 250 sqm, Rest Area KM 72A, West JavaCoffee Bean and Tea Leaf – 125 sqm, Rest Area KM 72A, West JavaWendy’s – 225 sqm, Rest Area KM 72A, West JavaBaskin-Robbins – 50 sqm, Rest Area KM 72A, West Javaa.testoni

AdamistBen ShermanBenefit CosmeticsCamaieuCarhati WIPCarto MoltedoCarvenEric KayserGiorgio FedonGlamglowHalston HeritageIppudoMcQManchester UnitedNew BalanceParkson

PopolamamaPumpkin PatchRubi ShoesSephora

NEW RETAILERS

2Q 2014 HIGHLIGHTS

Prime retail centre stock

New supply forecast (2014 – 2018)

Overall Prime Shopping Centresnet effective, on NLA



DelhiAs India’s retail sector continues to evolve following the relaxing of investment rules for foreign retailers, Delhi is poised to be a leading beneficiary. Competition to attract affluent, brand-savvy shoppers is increasing between retailers, especially in prime areas with high-quality shopping precincts. The retail landscape of India’s compelling capital city is divided into several submarkets spread across its vast terrain. Popular hangouts for local shoppers include Ambience, Promenade and Select City Walk in South Delhi, Ambience and MGF Metropolitan in Gurgaon, Great India Place in Noida, Europark in Ghaziabad, and Rohini City Centre and Metro Walk Mall in North Delhi.

FAST FACTS

n/aRetail sales growth


stock


(2014 – 2018)

0.8%Rental growth

(y-o-y)Rental value

(psf pm)

Net absorption remains negative

In 2Q14, net absorption remained net negative,

although some momentum was visible in leasing activity during

the quarter. Retailers show signs of expanding, but only in quality developments. The

overall vacancy rate rose by 10 bps q-o-q to 24.5%.

Retailers look to scale down store size

With limited vacant space available in quality developments, retailers

are looking to scale down store size or alternatively –

turning towards a high street presence.

Capital values rise in Prime South

Capital values moved up by less than 1% q-o-q in Prime South. In the Prime Others submarket, however, rents rose by 1.7% on account of leased retail assets being considered by investors.

Retailer expansion on the horizon

Retailer expansion is likely to regain momentum as

macroeconomic fundamentals improve and the new

government reconsiders FDI in multi-brand retail. Single-brand retail is likely to spur demand

in the retail sector as new entrants and active retailers

plan expansion.

Big brands active in Prime South

Nine West leased 3,000 sq ft in Select Citywalk. Triumph

Motorcycles leased 3,200 sq ft in Vasant Square, Hackett and Armani Junior leased 1,800 sq ft and 2,000 sq ft respectively in DLF Emporio. The largest leases of the quarter were

taken by Lifestyle (24,000 sq ft, Moments Mall) and CnM

(20,000 sq ft, MGF City Square).

Note: Delhi Retail refers to Delhi’s Overall retail market.

PizzaExpress – 679 sqm, Ambience Mall, Gurgaon PizzaExpress – 467 sqm, Ambience Mall, Vasant KunjFood Hall – 943 sqm, DLF Place, SaketIndigo Delicatessen – 505 sqm, Ambience Mall, Vasant Kunj

INR 247

Bobbi BrownBurberry BritDune LondonHeel & BucklePizzaExpressT M Lewin

NEW RETAILERS

2Q 2014 HIGHLIGHTS

Prime South Shopping Centresgross, on GFA



MumbaiIndia’s thriving financial and commercial nucleus is also the nation’s capital of style and design. Brand awareness among consumers is high and growing faster, encouraging global retailers, luxury and fashion brands to seek first-mover advantage in India’s edgiest shopping market. Mumbai is a large metropolis and the quality of retail developments has varied considerably following a wave of real estate development in 2011 that caused an imbalance in supply. Mall shopping is a popular concept, though, and shopping centres such as Palladium at High Street Phoenix, Inorbit, and Oberoi Mall offer a sophisticated mix of retail, dining and entertainment. More shopping centres such as Phoenix Market City, R City, and Infinity are poised to pamper shoppers with a wider choice of shopping experience.

FAST FACTS

n/aRetail sales growth


stock


(2014 – 2018)

0.4%Rental growth

(y-o-y)

INR 249

Rental value (psf pm)

Lack of supply has retailers looking at high streets

Underlying demand for retail space remained higher than

the low levels witnessed at the end of 2013. A lack of quality

mall space and a limited supply of new malls has retailers

leasing space on prominent high streets.

Rents and capital values rise marginally

Rents in the Prime South and Suburbs marginally increased.

However in Prime North, while demand was rising stiff competition from high streets

limited the ability of mall developers to raise rents.

Slight increase in stock with one new mall opening

One new mall (located in Navi Mumbai) became operational

in 2Q14 resulting in a 0.6% q-o-q increase in stock.

Poorly built or managed malls suffer

The overall vacancy rate continued to hover around 20% as absorption in good quality malls was met with

rising vacant space in poorly built or managed malls. The majority of poorly built malls

have witnessed a rise in vacancy rates over the past

two quarters.

Many retailers take wait-and-see approach

Many retailers are taking a wait-and-see approach, and holding back on expansion plans due to policy related

uncertainties. However, with the formation of a new pro-reform government we may

witness a transition in retailer sentiment.

Note: Mumbai Retail refers to Mumbai’s Overall retail market.

Cex – 135 sqm, R City Mall, GhatkoparPizzaExpress – 301 sqm, Hotel Horizon, JuhuEthos – 137 sqm, PalladiumBasecamp – 166 sqm, High Street Phoenix (Grand Galleria)Starbucks – 195 sqm, Infinity Mall, AndheriCentral – 4,319 sqm, Neptune Magnet Mall, BhandupBombay Dyeing – 221 sqm, R City Mall, Ghatkopar

Dunkin’ DonutsFossilStarbucksTruefitt & Hill

NEW RETAILERS

2Q 2014 HIGHLIGHTS

Prime South Shopping Centresgross, on GFA



SydneyAustralia’s largest city has truly come of age as a shopping destination. A varied portfolio of smart malls, department stores, designer brands and revamped heritage shopping centres befit its status as a high-profile international city. A large working population and a regular flow of tourists create a strong market for the historic Strand Arcade and Queen Victoria Building in the CBD, plus the strikingly remodelled Westfield Sydney and Mid City malls. Retail outlets extend along George Street and Oxford Street, while The Rocks and Darling Harbour are popular with visitors. Beyond the city centre, malls such as Westfield’s Bondi Junction cater to suburban consumers.

FAST FACTS


3.0 mil sqmRegional/

sub-regional centre stock


(2014 – 2018)

-0.7%Rental growth

(y-o-y)Rental value

(psm pa)

AUD 1,933

Retail turnover recovering

Retail turnover growth in NSW has recovered significantly,

although this has not translated into stronger leasing demand. Average super-prime

CBD rents increased 0.5% q-o-q driven by demand for

retail sites with high exposure.

International retailers driving leasing activity

International retailers continue to drive leasing activity with US retailer Brooks Brothers committing to a new store in

Martin Place in Sydney’s CBD.

Leasing market conditions expected to improve

The Sydney retail market continues to strengthen as retail turnover growth

outpaces the national trend. Leasing market conditions are

set to improve resulting in a reduction in vacancy rates and modest uplift in rental growth.

Investment volumes total AUD 321.8 million

Despite low retail investment activity across Australia,

the Sydney market has seen a considerable amount of

activity. Ten sales transactions totalling AUD 321.8 million were completed in New South Wales in 2Q14. A stable yet robust level of investor demand, combined with a lack of opportunities to acquire assets is driving yield

compression in the retail sector.

Construction activity increases, two major trends

emergeAs construction activity

picks up, two major trends are emerging. Institutional landlords are refurbishing

and expanding existing centres while two major

retail conglomerates (Woolworths and Wesfarmers)

are expanding home hardware store chains and

supermarkets.

Note: Sydney Retail refers to Sydney’s Overall retail market.

Victoria’s Secret – 116 sqm, Queen Victoria BuildingUniqlo – 1,485 sqm, MidCity Level 1Sephora – 800 sqm, Westfield Sydney Pitt StreetMary’s Burgers – 62 sqm (GF) / 110 sqm (Mezz), 150 Castlereagh StreetForever Flawless – 143 sqm, 413 George Street

BreitlingBrooks BrothersRolexTod’s

NEW RETAILERS

2Q 2014 HIGHLIGHTS

Regional Shopping Centresnet, on NLA



MelbourneMelbourne is famed for its eclectic dining and year-round calendar of events and festivities, and is emerging as a heartland of Australian fashion and design. Australia’s second most populous city also boasts a vibrant retail scene, ranging from the artisans of Flinders Lane, tailors and jewellery shops on Crossley Street and the cute laneways of QV precinct on Lonsdale Street to the high-end stores on Chapel Street and Collins Street, Bourke Street Mall and Chadstone the Fashion Capital, the southern hemisphere’s largest shopping centre. Impressive developments outside the CBD include Highpoint Shopping Centre and Craigieburn Central.

FAST FACTS


2.6 mil sqmRegional/

sub-regional centre stock


(2014 – 2018)

-0.5%Rental growth

(y-o-y)

AUD 1,462

Rental value (psm pa)

Retail turnover growth remains strong

Food categories remain a key driver of retail sales with

supermarkets, liquor and cafes/restaurants reporting above trend levels of sales growth. Department stores

remain a detractor from growth, which is consistent

with the national trend.

Leasing market conditions improve

Leasing market conditions are improving from the subdued

levels witnessed over the previous three years. The

Melbourne CBD continues to be revitalised with new supply, enhancing the retail offerings and drawing shoppers in from

the suburbs.

Supply slows

Retail supply continued to slow from the peak of 309,600

sqm in 2013. Beyond 2014, completions are expected to be below trend with just 123,300 sqm of retail space under construction due to

complete over 2015 and 2016.

Fundamentals expected to become

healthierAs fundamentals become

healthier, there is likely to be strong institutional investor

demand for retail investments resulting in further yield compression across all

formats.

Minimal change in rents

Stronger retail trading conditions and a small

decline in vacancy rates did not translate into a pick-up

in rental growth. Changes in average rents were mixed

across retail formats – regional centres recorded a decline of 0.5% q-o-q while

neighbourhood centres recorded growth of 0.5%.

Note: Melbourne Retail refers to Melbourne’s Overall retail market.

H&M – 5,000 sqm, GPO Bourke StreetTopshop – 2,732 sqm, Melbourne EmporiumUniqlo – 2,180 sqm, Melbourne EmporiumBrooks Brothers – 213 sqm, Melbourne Emporium

Brooks BrothersH&MKate SpadeUniqloZoo York

NEW RETAILERS

2Q 2014 HIGHLIGHTS

Regional Shopping Centresnet, on NLA



Fast FactsCURRENT RETAIL STOCK

(MIL SQM)NEW SUPPLY FORECAST

(2014 – 2018)RENTAL GROWTH

(Y-O-Y)RETAIL SALES GROWTH

(NOMINAL, Y-O-Y)

Hong Kong 2.4 +9% 3.2%-6.9% HKD 173

Beijing 2.5 +30% 8.4%10.4% RMB 1,281

Shanghai 4.3 +74% 4.6%10.4% RMB 52

Guangzhou 1.1 +78% 4.2%18.3% RMB 396

Tokyo n/a n/a 3.7%-1.5% JPY 68,336

Singapore 2.1 +21% 0.5%0.4% SGD 38

Bangkok 2.6 +31% -0.8%-6.2% THB 2,256

Jakarta 1.4 +25% 3.4%6.4% IDR 5,303,545

Delhi 1.1 +37% 0.8%n/a INR 247

Mumbai 0.9 +17% 0.4%n/a INR 249

Sydney 3.0 +8% -0.7%8.8% AUD 1,933

Melbourne 2.6 +6% -0.5%6.2% AUD 1,462

RENTAL VALUE

(psf pm, net, on LFA)Overall Prime Shopping Centres

(psm, pm, net effective, on NLA)Core Prime Shopping Centres

(psm per day, net, on NLA)Prime Shopping Centres

(psm pm, net, on GFA)Overall Prime Shopping Centres

(per tsubo pm, gross, on NLA)Ginza & Omotesando Prime Street Shop

(psf pm, gross, on GFA)Prime South Shopping Centres

(psf pm, gross, on GFA)Prime South Shopping Centres

(psf pm, gross, on NLA)Orchard Road Prime Shopping Centres

(psm pm, gross, on NLA)Overall Prime Shopping Centres

(psm pa, net effective, on NLA)Overall Prime Shopping Centres

(psm pa, net, on NLA)Regional Shopping Centres

(psm pa, net, on NLA)Regional Shopping Centres

(June 2014)

(June 2014)

(June 2014)

(June 2014)

(June 2014)

(June 2014)

(May 2014)

(June 2014)

(June 2014)

(June 2014)

Notes Retail sales growth figure quoted for Bangkok refers to the overall Thailand market, similarly Sydney refers to New South Wales and Melbourne refers to Victoria. All figures updated as at 2Q 2014. Stock figures are on a net lettable area basis.

SourcesRetail sales: various government websitesRents, retail stock and supply additions: JLL (Real Estate Intelligence Service), 2Q 2014

KK FungChair, AP Retail [email protected]

Tom GaffneyChair, AP Retail Board [email protected]

David RavenRetail Investment [email protected]

Asia PacificAnuj PuriChairman of Global Retail [email protected]

China Eugene [email protected]

Colin [email protected]

IndiaPankaj RenjhenLeasing [email protected]

Shubhranshu [email protected]

Neil [email protected]

JapanKenji [email protected]

KoreaJay [email protected]

New ZealandChris BeasleighLeasing/[email protected]

Philippines Lizanne Tan Leasing [email protected]

Tom [email protected]

SingaporeLee Siew LingLeasing [email protected]

ThailandSiwanart SrisomsupRetail Development Consultancy and [email protected]

VietnamTrang [email protected]

TaiwanNai Tzu [email protected]

AustraliaCameron TaudevinLeasing [email protected]

Tony [email protected]

Adam DraperLeasing [email protected]

Hong Kong Tom GaffneyCo-chair of AP Leasing Board [email protected]

IndonesiaJames [email protected]

Shaping decisions through retail intelligenceIn the fast-moving world of retail and leisure it’s all about solutions delivered with higher performance in mind. It comes down to global knowledge, and people with real passion and knowledge of the industry. We call it retail intelligence.

In Asia Pacific, we have leased over 130 million square feet of retail space on behalf of owners and retailers and consulted on over 220 million square feet of retail space for developers and investors. We also manage more than 72 million square feet of space for more than 250 retail properties.

With more than 40,000 people in 1,000 locations in 70 countries, our connected approach and cross-border expertise means we have the contacts and resources to make things happen – fast.

We strive to be best in class, acting as a genuine partner for your business and ensuring you stay one step ahead in a rapidly changing market.

www.ap.jll.com

www.joneslanglasallesites.com/ap-retail-cities

Jones Lang LaSalle

© 2014 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.

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