By Benjamin Chow on December 3rd, 2019
Global retail investment volume fell by a third over the first nine months of 2019 compared with 2018, as the sector’s investors grapple with pressure from changing consumer patterns and the rise of e-commerce. In the Asia Pacific region, however, investors are relatively more sanguine, with regional activity down only 7% year-over-year.
In fact, investors in Asia Pacific have flocked to a select few cities, while other major markets — especially those in Australia and Japan — have experienced declines. China in particular is bucking the global trend of more cautiousness, with Beijing, Shanghai and Tianjin registering strong volume increases in 2019.
China’s consumer spending is still growing at a steady, if somewhat moderated, pace. Many of the headlines naturally focus on the country’s burgeoning e-commerce sales volumes, yet sales of physical goods attributable to brick and mortar shopping also continues to grow in 2019.
Commercial investment into the retail sector in China got a boost in 2018 with income tax cuts aimed at juicing consumer spending. As the effects of the trade war took began to take their toll, authorities announced another round of tax cuts earlier this year which has again boosted investor activity into retail assets.
Buyers have concentrated their spending on Tier 1 cities. Investment into these markets has already reached a record of $6.9 billion in 2019. Investment into other cities over the same period retreated to $1.3 billion, a far cry from 2014 and 2015 when more than $5 billion was spent outside the Tier 1 locations. This renewed focus on the biggest cities in China is a trend we are also seeing across the other sectors.
Regardless of where investors are spending, with another $2 billion of deals in the pipeline, 2019 is shaping up to potentially be a record year for China’s retail sector.
RCA’s Asia Pacific Capital Trends report covers the latest data and trends in the region. Find out how to get the Q3 2019 edition by contacting us.
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