Bangkok--Feb 15--CBRE
The primary urban centres of South and Southeast Asia generally witnessed positive retail leasing activity in the last quarter of 2005 as evidenced in widespread upward rental pressure and the widening proliferation of overseas retail operators in a number of the region’s emerging markets. In Singapore, increased demand for concept retailing supported a rise in demand, as entertainment, yoga and spa facilities witnessed a rise in popularity. The outlook on India’s retail market continues to brighten as developers accelerate their construction of malls to capture the expected rise in demand from India’s rapidly expanding urban middle class. Meanwhile, despite a slight rebound in consumer confidence, retail rentals in Bangkok were steady in the fourth quarter of 2005. In the Philippines, a 27.1 per cent rise in Overseas Filipino Worker remittances in the January to October period lent support to retail spending in Manila against a backdrop of waning consumer confidence. In Ho Chi Minh City, a notable development, which has been noticed impacting the sphere of retailing across Vietnam as a whole, has been the rising prominence of the supermarket concept. Finally, in Jakarta, monthly retail rents and service charges were witnessed spiking upwards as a result of the strong inflation resulting from the hike in oil prices that stemmed from the Indonesian government’s moves to cut fuel subsidies.
In Singapore, it has been a year of growth for both retailers and retail landlords, with market sentiment attaining the most positive level seen in recent years. Retail sales and tourist arrivals both performed well and surpassed the previous year's levels. All this has translated into a robust pace of leasing activity throughout the year, even in the fourth quarter, which is traditionally a quieter period due to the focus on festive season promotions. One of the market highlights of the period was the sale of a much sought-after government site in Orchard Road for S$1.38 billion (Baht 33.5 billion) to a joint venture between Singapore's CapitaLand and Hong Kong's Sun Hung Kai. Also notable during the year was the continued shift in ownership of retail malls to S-REITs. The CBRE index of islandwide prime retail rents rose 3.1 per cent in 2005. The average Orchard Road prime rent increased 1.9 per cent during the year to reach S$355.25 (Baht 8,632.58) per square metre per month at end-December, the same level as its last peak in September 2001.
In India, the real estate sector has recently witnessed the emergence of newer retail formats with hotels, multiplexes and commercial areas being developed within malls. Clubbing these facilities together is seen as a better footfall generator for such developments. Many international apparel and food brands have aggressive expansion plans for India, which will supply the much-needed operators to support the space provided by upcoming new malls. The norms for FDI in retailing are currently still under review and it would seem evident from industry sources that the government is unlikely to open up the entire retail sector in a single step. Rather it is more likely that it will allow FDI in a phased manner starting with only a few market segments such as food and groceries, moving on to consumer goods and high-value merchandise.
Meanwhile, seven retail centres came on stream in Bangkok during the fourth quarter of 2005. The most noteworthy was Siam Paragon, the two-hundred-thousand-square-metre luxury retail mega project in the Pathumwan area, which held a spectacular four-day grand opening from the 9th to the 12th of December. The total supply of retail space in Bangkok rose by approximately 8 per cent to 4.35 million square metres at the end of 2005, as compared with 4.02 million square metres at year-end 2004. Retail rents in Bangkok were broadly stable in the fourth quarter, despite the recent wave of retail mall completions. There was no change in average rents quarter on quarter, in Baht terms. Monthly rents at Grade A shopping centres in prime CBD locations ranged from Baht 1,800 to Baht 3,000 per square metre for ground floor facilities and from Baht 1,500 to Baht 2,800 per square metre for outlets on the upper floors.
The growth of Overseas Filipino Worker (OFW) remittances remained strong and could top US$10.7 billion (Baht 420.5 billion) for all of 2005, a 25.2 per cent increase over the US$8.55 billion (Baht 334 billion) figure recorded in 2004. This surge in remittances is expected to continue into 2006 and will further fuel the growth of the retail sector. Moreover, all major mall developers experienced positive retail rental revenue growth in 2005 and will continue to mount ambitious plans to build new malls all over the country - an indicator of their confidence that consumer spending will grow over the long-term. During the second half of 2005, net rents in the Makati CBD ranged from above PHP 700 (Baht 539) per square metre at the low end to PHP 1,400 (Baht 1,078) per square metre at the high-end for prime retail space.
Vietnam's total retail sales rose by 20.5 per cent year on year, to be recorded at US$29 billion (Baht 1,139.7 billion) in 2005. The double-digit retail sales growth and an increasingly affluent population have prompted both local and overseas retailers to expand rapidly in Vietnam. For instance, Malaysia's Parkson, now fully licensed to operate in Vietnam, has announced the opening of three trade centres in Hanoi and Ho Chi Minh City. After the opening of the Big C Thang Long supermarket in Hanoi, the French Bourbon Group announced plans to open seven more supermarkets nationwide. Metro plans to build five outlets in Haiphong, Da Nang and Can Tho by the end of 2006. Hong Kong-based Dairy Farm has also expressed interest in investing in Vietnam.
In preparation for the Idul Fitri, Christmas and New Year holidays, many new retail centres accelerated construction in a bid to open within the fourth quarter of 2005. As a result of this speed up, a number of retail centres, including Cibubur Junction (ex Cibubur Town Square), ITC Depok, Depok Town Square and Mega Glodok Kemayoran announced their soft opening in the fourth quarter. Many new retail centres are being developed outside Jakarta to cater to the growing population living in the city's suburbs, including Depok, Bogor, Tangerang and Bekasi, which are rapidly emerging as retail micro-markets in their own right. Monthly retail rents in Jakarta increased by 17.4 per cent quarter on quarter to US$66 (Baht 2,594) per square metre while service charges rose by 20 per cent quarter on quarter to US$7.64 (Baht 300) per square metre in the fourth quarter of 2005, as a result of the hike in oil prices. End.