Uncertainty looms over Asia-Pacific retail property market: survey

Written by Sajan C Kumar | Chennai | Updated: Sep 25 2009, 04:13am hrs
The next 6-12 months will be a period of uncertainty for retail property in Asia-Pacific, says Cushman & Wakefields Main Streets Across The World 2009 survey.

In India, while the retail sector continues to expand at a rapid pace, the global slowdown has led high street rents in most major cities to crash. While new spaces are opening up and retailers are hoping to take advantage of attractive deals to enhance their presence in key locations, there is unlikely to be a significant uptick in rental values in the short term in most countries.

Across the Asia-Pacific region, rental values declined by 17.3%. The negative rental growth was most notable in India (-41.5%), Malaysia (-17.6), Taiwan (-13.3%), South Korea (-8.7), Japan (-8.3%), Indonesia (-6%), China (-5.1%) and the Philippines (-4.2%).

Weak economic fundamentals severely affected the retail sector in a number of traditionally stable markets in the region, and many retailers scaled back or postponed their expansion plans, says the survey.

On the upside, the retail sector in India and China is better placed to benefit from an upturn in the economy, given that a young and growing population is supporting demand for high quality retail, points the survey.

The slowdown showed signs of abating in the second quarter of 2009, as the financial stimulus packages began to show results. The global retail property market now appears to be more stable and a modest pick-up in activity may soon be evident.

However, secondary streets/sche-mes are expected to see a downward adjustment in rents as retailers focus increasingly on AAA locations and continue to scale down their presence in less profitable areas. In many cases this means lower rents and more incentives for tenants to take up space.

While retail sales appear to be stabilising, retailers are seeking to take advantage of landlords perceived weak position in the current market. The report suggests a move towards sharing of risk between retailers and landlords, in some instances with a lower base rent being off-set by a higher turnover component. For the time being, occupier demand will continue to be more selective, at least until the wider economy and labour markets show firmer signs of recovery, the report goes on. Emerging markets such as India, China Russia, and Brazil are unlikely to grow as rapidly as in recent years, although in the longer term these countries are well-positioned to continue to attract retailers given the sheer scale of their market potential.