The Unmatched Partnership: Rent, Tech and Experience

CBRE's Vivek Kaul shares his insights on the 2022 outlook for Asia Pacific's retail landscape.

24 Jan 2022

By Vivek Kaul

A Guide to Asia Pacifics Data Centre Industry for Investors and Enterprises

At CBRE’s recent 2022 Asia Pacific Market Outlook webinar hosted by our research team, my colleague Ada Choi – APAC Head of Occupier Research and Data Intelligence – asked me some hard-hitting questions about the retail outlook for the year ahead.

I have shared my views below as our retail team goes into 2022 with invigorated interest in how clients are adapting to retail technology and shopper experience as drivers of growth.

Following the emergence of the Omicron variant, do you remain optimistic about the retail recovery in 2022? Which markets and sectors do you expect to be most active?

I remain optimistic for a couple of reasons. First, we have been operating our business amid uncertainty and a situation of flux for the past two years. Retailers and developers in the region have developed standard operating procedures that are functioning well, and the reaction time needed to adapt to any new norm or restriction is faster and smoother.

Second, most markets in Asia Pacific are still imposing travel restrictions. The growth and stabilisation of sales that we have seen over the last few quarters is primarily due to strong domestic consumption, and less due to tourist spending or international visitors.

We saw evidence of ‘revenge consumption’ of luxury goods and F&B in 2021. Do you see these segments continuing to attract interest in 2022?

Markets like mainland China Japan, Korea, Australia and India will remain most active in the region because of strong domestic demand in sectors such as luxury, athleisure, home improvement and F&B.

Of these, F&B has been particularly resilient as it keeps bouncing back strong every time restrictions for dine-in have been removed. We have also seen significant demand from EV car manufacturers wanting to take prime real estate in some of these markets, especially as the world continues to strive toward a cleaner and greener future.

Where are retailers going – prime locations or residential catchment areas?

Luxury or premium retailers still prefer to be in prime locations on key high streets and within centres in the city. ‘Prime’ is the key word here. They are creating experiences that cannot be found solely online and taking advantage of softer rents in these locations.

Having said that, affordable retailers prefer to be closer to residential catchment areas as suburban retail developments are performing extremely well courtesy of “work from home” policies. In some cases, the rental value in these locations is inching closer to those in the central business and shopping districts.

For F&B operators, demand is driven by casual dining or quick service restaurants with plans to open outlets closer to residential catchment areas either through cloud kitchens, drive-thrus or smaller takeout-only outlets.

Retail landlords have been quite flexible over the past 24 months. Do you expect this to continue? Apart from lowering rents, what else can they offer tenants?

I have observed that high street landlords have been more flexible with rent reduction compared to institutional developers. But rent is just one factor to consider in a retail strategy. We are seeing more developers keen to partner with their retail tenants in subsidising fitout costs and, in some cases, become a master franchisee of their brand in the region.

The pace of technology adoption among developers has been notable, and they are creating and using tools to engage with customers constantly. Some innovative forms of engagement between landlords and retailers include the bundling of deals by different brands within a shopping centre, offering vacant space for temporary use to new domestic brands, and creating new shopper experiences that cannot be found online.

Regardless of which stage of the retail business cycle you are in as a retailer, investment fund or developer, feel free to connect with me or my team as we present data science to support your retail business strategy.

Read our 2022 Asia Pacific Real Estate Market Outlook here.

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