Kuala Lumpur ranks world’s 11th top growth city for retail

KUALA LUMPUR (Oct 13): Kuala Lumpur ranked 11th position out of the top 20 growth cities for retail around the world, ahead of Jakarta and Manila, according to a report released by real estate consultancy Jones Lang LaSalle IP Inc (JLL) yesterday.

Dubai, Shanghai and Beijing held the top three positions.

In this year’s Destination Retail report, JLL said Asia is fuelling the growth of the global retail sector, with Chinese cities dominating the region’s fastest-expanding markets.

It noted that out of the top 20 growth cities for retail, 12 are in Asia and of those, eight are in China.

“The global retail landscape is expected to change significantly over the next 10 years as a fast-growing middle class in emerging markets attracts retailers hungry for growth,” said JLL’s Global Retail Leasing Board chairman David Zoba in a statement yesterday.

“The search for growth is escalating the penetration of international brands across the world’s most attractive retail cities, especially in Asia. Retailers who succeed in acquiring the right space in the right place at the right time will benefit from successful, profitable growth, but they should be mindful that potential rewards go hand in hand with risk,” he added.

“Emerging markets can expose international retailers to greater levels of economic and geopolitical risks. One pertinent example is China’s anti-corruption campaign and the knock-on effects on the luxury market,” said JLL head of retail for China James Hawkey.

“However, international retailers are increasingly comfortable dealing with these risks and generally have their eyes on the long-term prize of establishing a strong position in major world markets,” he added.

JLL pointed out that rents in these emerging markets reflect legislation, market transparency, reputational risk, maturity and growth potential, meaning that their levels are relatively low compared with more mature markets.

“Places like Ho Chi Minh City, Jakarta and Bangalore present an opportunity for retailers to establish their brands at rents of less than US$2,000 (RM8,360) per sq m per year, with projected in-store sales increasing by 8% to 10% until 2019, based on Oxford Economics forecasts.

“However, as cities mature and the pace of new construction of retail centres slows, rents will gradually increase,” it noted.

The Destination Retail 2016 report examines the presence of 240 international retail brands across 140 retail cities, giving insights into international retail expansion. The 140 cities make up 36% of the world’s gross domestic product, 13% of the global population and 33% of total consumer spending.

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This article first appeared in The Edge Financial Daily, on Oct 13, 2016. Subscribe to The Edge Financial Daily here.