SHANGHAI — Tokyo and Hong Kong remain top cities for new brands to open in Asia Pacific while retail expansion in China, particularly in first-tier cities, remains robust due to an injection of new supply in the market meeting pent-up demand for more niche and bridge brands to enter the country, according to a retail report released Monday by real estate consulting firm CBRE.

The study, which analyzes retail expansion for the first three quarters of 2013, found that growth is fueled by mid- to high-end brands while luxury expansion has been mitigated by companies adopting a more calculated strategy for their presence in the region, particularly in China where slowing economic growth, changing consumer tastes and a government crackdown on ostentatious spending have impacted the sector.


“We have seen a slowdown in the number of new stores being opened by luxury brands in China, especially those who have been in the market for 20 years,” Sebastian Skiff, director of retail for CBRE in Asia, said. “That is natural, but also at the same time, the consumer is changing. You have these two dynamics going on. China is still a market of growth, just of a slightly different type — much more sensible and educated growth.”


Skiff said many luxury brands are now focusing on upgrading existing infrastructure to meet the demands of Chinese consumers who increasingly seek a premium in-store experience and better customer service. The days of breakneck expansion into far-flung Chinese cities is, for the most part, over, he said, adding that luxury watchmakers and “core luxury” brands are contracting the most while creative luxury and bridge brands are continuing to open in China.

“It is not going to bounce back to where it was because it has changed,” Skiff said. “The consumer has changed.”

He noted that in the face of more retail competition, traditional luxury malls, such as Plaza 66 in Shanghai, are now targeting extremely affluent consumers by offering more personalized merchandise and customer service while luxury brands with stores in newer shopping centers are catering to a broader market. “Luxury brands are now able to differentiate their stores,” he said.

Luxury and business retailers accounted for 23 percent of new entrants in Asia in 2013, which is unchanged from last year. Midrange fashion retailers comprised 21 percent of new entrants, compared to 18 percent in 2012. Seventy percent of new market entries in Asia Pacific were in emerging markets and 30 percent in developed markets. With 30 new brand openings, Hanoi recorded the highest number of new entrants of any city in Asia Pacific in 2013, the report said. Manila, which had 13 new entrants, also was in the top 10.

In China, Beijing, Shanghai and Hangzhou recorded the most new entrants this year, CBRE said.

Fast-fashion labels introduced more secondary brands and opened more stores in second-tier cities in China and Japan. In newer markets, retailers are still struggling to find retail space due to an inadequate supply of commercial properties in prime locations, CBRE said.

The study projects that retail sales across the region will see positive-yet-slower growth in 2014 compared with 2013. Retailers with an established presence are increasingly moving into emerging markets in Southeast Asia to tap into emerging middle classes while brands first entering Asia Pacific will continue to focus on Hong Kong and Tokyo, CBRE said.