FEATURES Chart 3-4
Retail Rental Overview (as of Q4 2012)
Cumulative Retail Rental Growth, 2008-2012 10-Year Historical Average Retail Rental Growth Rate, 2003-2012
2008 Singapore Kuala Lumpur
Other M alaysian Cit ies Bangkok
Jakarta
Ho Chi M inh City Hanoi
Prime
Suburban Prime
Suburban —
Prime
Suburban Prime Prime Prime
-100 -80 -60 -40 Sources: CBRE; Jones Lang LaSalle; Prudential Real Estate Investors
sellers are known to have at times circumvented regulations. Local officials are more prone to corruption and may not always comply with the legal system.
Asset management risk. This type of risk is often a function of maturity. Less mature markets lack a deep pool of talent, local knowledge and market information.
Property positioning/tenant mix. With many Southeast Asian markets in the throes of structural change, modern retail construction projects have surged in various locations. As the modern retail stock increases, asset competition will be heightened. Consequently, owners and managers will spend more time considering how to position assets and optimize the mix of retail anchors and tenants.
Site selection. Retail catchment areas outside of prime districts are subject to rapid change as infrastructure is extended. As a result, secondary or suburban locations must be chosen with caution.
Retailer relationships. Domestic retailers dominate the tenant mix in many Southeast Asian cities. Even though international retailers continue to expand their footprints into these markets, business relationships with domestic retailers are crucial for success. Without local knowledge or local networks, the risks will be greater.
Assessment of Retail Attractiveness All of the variables described thus far as contributing
to retail attractiveness were scored and assigned a value of Attractive, Fair or Unattractive based on that score. Results are shown in Table 3-4. Despite sluggish demand-side fundamentals and
performance in the near term, Singapore came out on top of the Retail Attractiveness Ranking in Table 3-5 because it scored so well in most other categories. Jakarta scored well for the opposite reason. Near-term fundamentals of constrained supply and ample demand offset Jakarta’s moderate risks and limited competitive amenities such as infrastructure and accessibility.
Conclusion The opportunities vary, depending on investors’
individual strategies and their appetite for risk. Several options are described below:
Structural Opportunities: The focus should be on capital cities in emerging markets or secondary locations in maturing markets.
Development of malls in emerging markets: Retail assets in Singapore and Kuala Lumpur are trading at the lower end of their historical yield bands, thus reflecting the region’s highest levels of market maturity and stability. Retail markets in Indonesia and Vietnam show greater volatility and have less transparency and liquidity. Development strategies
-20 0 20 Cumulative Percent (%) Change 2009 2010 2011 2012 0.0% 1.0% ||||||||| 4.2% |||||||||||||||||||||||||||||||||||||||||| Rental
Out look ◄► ◄► ◄►
5.5% |||||||||||||||||||||||||||||||||||||||||||||||||||||| ▲ —
1.6% ||||||||||||||| —
2.6% ||||||||||||||||||||||||||
4.4% ||||||||||||||||||||||||||||||||||||||||||| 3.9% ||||||||||||||||||||||||||||||||||||||
40
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INTERNATIONAL COUNCIL OF SHOPPING CENTERS
16 5
RETAIL PROPERTY INSIGHTS VOL. 20, NO. 1, 2013
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