A new CBRE report, “How Global is the Business of Retail?” aims to answer the question of cross-border retail activity by analyzing the operational networks of 334 leading international brands across 61 countries, which accounts for a majority of the world’s economy.
To examine the extent to which retailers expanded their global operations in 2015, CBRE measured all the international retailers entering each of the markets it covers.
Overall, new cross-border retail activity grew 3.1 percent last year. The sample of 334 leading retailers slowed their expansion as their city footprint grew only 1.6 percent last year.
Retailers from the Americas continued to dominate as the most globalized brands, with 87 percent present in all three global regions: the Americas, EMEA and APAC.
Anthony Buono, executive managing director of retail services in the Americas, said some U.S. retailers may be using international expansion to offset sluggish sales at home. “Broadly speaking, there are only certain levers that retailers can use to grow their brands,” Buono said. “One way is expanding in the current country they’re in, but in the U.S. there’s more optimization. They can expand the brand in other channels.”
EMEA-based brands have a stronger preference for APAC compared to the Americas, the study said, citing H&M, Agent Provocateur, Elevenparis and Jo Malone as expanding their networks of stores in Asia.
Hong Kong was the hottest market in 2015 with 73 new brands opening there. Singapore came in second place with 63 new brands, followed by Tokyo (57), Taipei (47), Moscow (40), London (39), Dubai (38), Beijing (37), Bucharest (35) and Daha (29).
“Despite retail markets in Hong Kong and Singapore being under significant pressure from strong headwinds, both cities welcomed more new entrants,” the report said. “The sharp correction in rents on Tier 1 streets in Hong Kong created expansion opportunities for mid-range fashion and accessories brands. Retailers seem to be gaining the upper hand in lease negotiations in Singapore as well.”
Notable exceptions include Harbour City in Hong Kong and The Shoppes at Marina Bay Sands in Singapore, where the slowdown in retail sales and tourist spending has led some brands to exit the market. “Nevertheless, Hong Kong, Singapore and Tokyo remain attractive markets as the gateway to Asia,” Buono said.
CBRE found that home and department stores grew their footprints the most in 2015 at 2.9 percent. Value and denim brands added 2.4 percent to their global footprint, for a presence in 72 cities.
Luxury and business fashion, and specialist clothing, each rose 2 percent, while mid-range fashion grew its footprint by 1.8 percent.
The survey revealed that the top 20 target cities saw 700 new market entrants in 2015 compared with 676 in 2014.
Tokyo, which slid into third place after being last year’s top target market, has seen domestic demand that’s decidedly mixed. The majority of new brands in Tokyo selected secondary locations in core areas to avoid high rents and low availability on prime streets.
Taipei’s retail sector has seen activity from fast fashion brands such as H&M, Forever 21 and SPAO. Tight leasing conditions sent new brands to shopping centers, such as the recently completed The Breeze Xinyi.
Despite economic and political turmoil, Russia welcomed 52 international retailers in 2015, 40 of which opened in Moscow and 12 in regional cities.
“Despite being the most internationally penetrated market, London continues to attract new brands — 39 in 2015 — with the large majority in the coffee and restaurant sector, and over half the new entrants hailing from France or the U.S.
Doha, which attracted 29 new brands, is in the throes of a construction boom. The past decade has seen a variety of large scale malls open, which increased the opportunities for retailers to open stores alone or with franchisees.
The Gulf Mall in Gharaffa is one of the newest additions to Doha’s growing retail offering and features 200 stores, including new international brands Old Navy, Reserved, Punt Roma, Kosebasi and Melenzane. Lagoona Mall, one of the country’s leading high-end shopping centers unveiled international brands such as Mulberry, M Missoni, IWC Schaffhausen, Karl Lagerfeld and Tory Burch.
The appeal of Canada’s cosmopolitan cities and diverse population has attracted Nordstrom and Saks Fifth Avenue to the north. Retail sales in Toronto grew 3.2 percent in 2015 and are expected to grow another 4.5 percent in 2016. “Despite sluggish economic growth, interest and spending on luxury retail is increasing among Canadian consumers to the benefit of high-end retailers,” the report said.
European and Asian brands may find this an opportune time to enter New York. “It’s clear that opportunities to enter the New York market are broadening daily,” Buono said. “There are going to be opportunities to sublease and we’ll see those growing.”
Buono said a specialized group of Chinese brands are starting to take a look at the U.S. “They are more discount-oriented brands that come from the manufacturing side of the world,” he said. “I think they’ll have a better chance of succeeding here than some of the mid-market brands.”
Notwithstanding the slowdown that’s clearly occurring in different parts of the world, the notion of expansion and globalizing brands hasn’t stopped. “It’s being fueled by Internet,” Buono said. “The Internet is a global instrument. This all fits together.”