FEATURES Table 3-3


Total Return Outlook (as of Q4 2012) Minimum Maximum Minimum Maximum


Income Return Annualized 2013-2016 Singapore


Kuala Lumpur


Bangkok Jakarta


Ho Chi Minh City Hanoi


Prime


Suburban Prime


Suburban Prime Prime


Prime Prime


4% 5%


6% 7%


7% 8%


10% 11%


5% 6%


7% 8%


8%


10% 12% 13%


Capital Appreciation Annualized 2013-2016


3% 1%


2% 3%


5% 3%


4% 2%


3% 4%


7% 5%


Outlook Uncertain Outlook Uncertain


Sources: Prudential Real Estate Investors; Jones Lang LaSalle; CBRE


within these emerging national markets should be limited to prime locations in the major cities of Jakarta, Ho Chi Minh City and Hanoi. Local partner relations, rampant supply and regulatory burdens are among the many significant risks offsetting potentially high returns.


Table 3-4 Retail Attractiveness Matrix (Year-End 2012) 1


2 3 4 5 6 7 8 9


10 Table 3-5


Retail Attractiveness Ranking (Year-End 2012) Rank


Retail Market Singapore


Singapore


Kuala Lumpur Jakarta


Malaysian cities* Kuala Lumpur Bangkok Bangkok


Ho Chi Minh City Hanoi


* Other than Kuala Lumpur Source: Prudential Real Estate Investors


of suburban malls outside central Bangkok. Although transparency and local market knowledge are improving in Bangkok, they continue to be significant risks outside core areas.


Cyclical Opportunities: Especially on high streets, prime locations in mature economies offer the greatest potential for reliable cyclical rebound. Singapore’s Orchard Road is a potential match for this strategy. Downturns in economic cycles pose challenges that impact rental performance, making well-timed cyclical investment opportunities attractive. Of course, the major risks to such a strategy involve the timing and price point of market entry.


Note: Retail floor space per capita is used to assess the capacity of the market. Relatively underserved markets (i.e., low per-capita retail floor space) appear more attractive than those with an above- average retail capacity. Source: Prudential Real Estate Investors


 Suburban malls in secondary locations in Thailand: Urbanization, improving infrastructure and rising wealth levels are among Thailand’s attractive attributes. Affluent residential suburbs of Bangkok as well as second-tier Thai cities and resort locations offer potentially attractive retail


investment


opportunities. An encouraging milestone is Thailand’s successful launch of the Tesco Lotus REIT in 2012, which perhaps paves the way for wider introduction


Core/Defensive Strategies: Suburban malls in mature or maturing markets offer a balance of consumer staples and discretionary items, and the short retail lease cycles, typically two to three years, in Southeast Asia can offer a degree of management flexibility in shifting the tenant mix as economic cycles turn. Investors should focus on those cities where governments are committed to maintaining and expanding public-transportation networks. Suburban malls in Singapore fit neatly with this strategy. Second-tier urban areas in Malaysia, such as Penang and Ipoh, might also prove attractive. Major risks are related to retail-specific factors, such as property positioning, location and catchment, tenant mix and present and future transport connections within the urban area.


Submarket Suburban


Prime


Suburban Prime Prime Prime Prime


Suburban Prime Prime


INTERNATIONAL COUNCIL OF SHOPPING CENTERS


17 6


RETAIL PROPERTY INSIGHTS VOL. 20, NO. 1, 2013


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