#nomnomnom - · PDF fileA new trend towards sustainability in mixed-use ... dubbed the...

Retail Cities | 2016

#nomnomnomWhat’s in store for the ASEAN food and beverage scene?

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Southeast Asia’s food and beverage sector is more intense than ever. Rapid population growth and urbanization across the region are the primary drivers for the sector’s growth. Whilst opportunities are aplenty in SEA, the landscape is highly competitive, with increased consumer expectations.

Gary Nonis JLL, Singapore

Contents

Fast Facts

04

08

10

When in Thailand, burgers on the go

Singapore’s CBD transforms into health-conscious work, live and play destination

06 What’s cooking in Indonesia’s F&B scene

Retail Cities

10 Bangkok11 Jakarta12 Kuala Lumpur13 Manila14 Singapore

15

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jllretailcities Singapore’s CBD transforms into health-conscious work, live and play destination #healthySG #lifestyleSG #SGliving

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05#nomnomnom | What’s in store for the ASEAN food and beverage scene?

A new trend towards sustainability in mixed-use developments incorporating healthy lifestyles and wellness is driving retail concepts in Singapore’s Central Business District.

In Singapore’s Central Business District, an area dominated by skyscrapers and office towers, a growing consumer demand for health and wellness choices is driving contemporary retail concepts and new thinking about urban lifestyles.

The island nation, dubbed the ‘Garden City’ for maximising open space within its urban environment, is seeing a new trend towards mixed-use developments incorporating retail and food and beverage (F&B) components. The result is a demand for products and services, such as gyms, juice bars, organic gardens and new F&B concepts that meet the needs of the growing number of health-conscious consumers.

The trend includes F&B outlets with gardens to grow their own produce, organic foods, cold-pressed juice bars and menus that are made to order for the growing health and lifestyle market.

“Singapore consumers are becoming more aware of their lifestyle choices- what they eat and where their food has been sourced as well as placing more emphasis on their fitness regimes” says Gary Nonis, National Director, Retail at JLL in Singapore.

Healthy lifestyles form an inspiration for Downtown Gallery, a new mixed-use development completing in Q4-2016 that will combine fashionable shopping and nutritious food choices with boutique gyms such as pilates, martial arts, yoga and spinning classes, as well as healthy living and eating options.

“A lot of food operators are looking at bringing in more healthy food concepts to meet the growing demand and operators and developers are looking at sustainability, such as development around urban parks and green spaces and how these can be incorporated into the healthy lifestyle.”

Singapore’s government, whose urban planners are always thinking about and planning for a sustainable future, has put an emphasis on transforming its CBD into a more holistic area.

The vision is ‘Work, live, play’; that is, mixed-used developments that allow people to live, work and have fun within the same neighborhood – in essence, a micro-city. Greenery, sustainability and a healthy lifestyle are key components in Singapore’s new smart growth emphasis.

Examples of this trend can be found in the new developments of Tanjong Pagar Centre and South Beach. Both developments are mixed use projects incorporating Office, Residential, Hotel, Retail and F&B accommodation in meeting this “Live, Work and Play” requirement. Tanjong Pagar Centre will contain a 100,000 sq ft Urban Park surrounded by F&B units as part of it’s retail component and South Beach contains F&B and retail accommodation under a sustainable microclimatic canopy further enhancing both developments sustainable credentials.

While Singapore’s CBD has long been a popular destination for F&B and convenience retail, the move to ‘Work, live, play’ means there’s new consumer demand from its urbane, health-conscious denizens. F&B operators are no longer catering to crowds limited to weekday lunch hours only.

“The landscape in the CBD has changed,” said Gary Nonis, JLL’s National Director for Retail. “Prior to today it was simply offices and office workers. Now there is a big residential component coming in, in line with the government’s ‘Work, live, play.’ And they value a healthy lifestyle, open space, green credentials and sustainability.”

“Singapore consumers are becoming more aware of their lifestyle choices- what they eat and where their food has been

sourced.”Gary Nonis, JLL Singapore

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jllretailcities What’s cooking in Indonesia’s F&B scene? #indonesiaculiner #indofood

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With wealth among Indonesians on the rise, so is their appetite for eating out and the finer things in life, including a ravenous interest in contemporary-style food and beverage (F&B) outlets.

Ask any teenager in Jakarta and they’ll probably be able to tell you what their favourite brand of bubble tea is. From Gong Cha to Boba Inc, cafes that serve up refreshing cups of tea with toppings like strawberry-flavoured tapioca balls or ice jelly have popped up in malls across town, often accompanied by queues.

According to Nielsen estimates, Asia’s middle class is on track to comprise 52 per cent of the region’s population by 2020. Indonesia is at the forefront of this trend, with a middle-income segment expected to more than double in size by the end of this decade.

With a large young population that enjoys socialising over food, a higher number of women joining the workforce and busier lifestyles, more Indonesians are choosing to dine out for both leisure and convenience.

Eager to feed the growing hunger for this restaurant lifestyle, international F&B operators, as well as local brands, are seeking retail opportunities in big cities like Jakarta, Bandung, Surabaya and Medan – hotspots with concentrated numbers of mid- to high-level income earners.

Yet another lure for F&B providers is the surge in shopping centre openings, which bring a whole range of new retail opportunities and prime real estate for putting their consumables in front of the most active purchasers.

Between 2011 and 2013, a further 11 shopping centres were launched, opening up an unprecedented 40 per cent of new retail space or 45.7 million square feet. Up to 40 per cent of this retail space is regularly eaten up by F&B outlets, according to shopping mall operators in Jakarta.

Unquenchable thirst for cafe culture

Euromonitor International has already been tracking Indonesia’s unstoppable upward trajectory in per capita food expenditure, rising since 2002. Its research also showed that between 2007 and 2012, the number of chain cafes more than doubled to 680, with sales value growing by a compound annual growth rate of 15 per cent during that period.

James Austen of JLL’s Retail Leasing, Indonesia says: “Demand for high-quality food in Indonesia has been growing steadily and big-name outlets are taking notice.

“All the indicators are only pointing to the market getting stronger for F&B operators, with more choices opening every year for Indonesians.”

Brands taking advantage of the strength in the market include the iconic Starbucks, which has 200 stores in 13 big cities and is intending to double its stores in the country in five years. Other American drink and snack brands, such as Dunkin’ Donuts, Baskin Robbins and Cold Stone Creamery, have also seen continued success in satiating the sweet tooth of local customers.

Meanwhile, F&B players closer to home, such as Singapore’s famous BreadTalk bakery and Chinese cuisine specialist Crystal Jade have also been moving in and expanding their presence in Indonesia.

New flavour for holidaymakers

Yet F&B outlets are not just thriving in the major cities. Top tourism locations, such as Seminyak, Ubud and Bukit Peninsula in Bali, are attracting interest from foreign companies, with the current weak rupiah a strong motive for international investment and crowds of tourists.

Bali has come a long way since cult brand Ku De Ta in Seminyak opened on the island in 2000, cementing itself as a formidable dining destination venue with its diverse menu, resident DJs and gorgeous sunsets.

Over the past decade, decorated local and international chefs, such as Will Meyrick, Chris Salans, Nicolas Tourneville and Said Alem, have all set up shop, putting Bali on the dining map.

More recently, Potato Head Beach Club has been another game changer. Launched in 2010, this trendy spot is the place to see and be seen, with its infinity pool, two bars, restaurants and world-renowned mixologist, beckoning sunseekers and drinkers alike.

“Much of the opportunity for international F&B outlets is in chic resorts, which have been seeing an influx of interest in the past few years,” observes Austen. “However, the arrival of these cult brands and international chefs have also helped spur development in the surrounding areas.”

With both locals and holidaymakers keen for a seat at many of the country’s hot new cafes and restaurants, the F&B retail scene in Indonesia shows no signs of slowing.

“The arrival of these cult brands and international chefs have also

helped spur development in the surrounding areas.”

James Austen, JLL Indonesia

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jllretailcities When in Thailand, burgers on the go #thailandfoodie #eatandgo


Is Thailand’s private consumption expenditure growth and the convenience of quick meals on-the-go what makes it appealing for Drive Thru F&B brands to set their sights on Bangkok?

Few retail formats symbolize the shifting expectations of consumers quite like Drive Thru dining. Since being pioneered in the United States in the 1940s, the Drive Thru restaurant or café has enabled customers to consume light meals, soft drinks and coffees without leaving the comfort of their car. Orders are generally placed using a drive-up microphone, and are collected by driving to another window. It is designed to be a largely effortless process for consumers – making it not so much a shopping preference as a distinctive lifestyle statement.

In essence, Drive Thru dining epitomizes convenience, and this format is starting to gain popularity across South East Asia. Suburban residents in the region’s larger cities are discovering they can purchase and consume food and beverage products “on the go” when they choose – without having to waste time by parking their car and physically entering a café or restaurant.

Bangkok is a good example. The structure of the Thai capital’s residential landscape has changed considerably in recent years as suburban areas become increasingly popular with commuters. Several community malls and shopping centres have opened their doors in decentralized areas of Bangkok as shifting consumer lifestyles place a greater emphasis on localized services and retailing.

The inbound tourism growth, as well as improving household incomes and population growth is placing upward pressure on F&B consumption. Food consumption in 2015 grew by 3.2%, however BMI Research expects food consumption to grow by 4.8% between 2014 and 2019.

Expanding into the suburbs

The embrace of localized convenience is creating new opportunities for F&B Drive Thru operators’ seeking expansion options beyond Bangkok’s crowded shopping streets and malls. In addition to offering neighbourhood locations, an additional attraction of Drive Thru outlets is that this quick-service format typically generates revenues 15-20% higher than a traditional outlet. Part of the reason for this is lower staff costs, and also deconstructed menus – which mean less food wastage. The stripped down menus are designed to reduce the complexity for consumers, and hasten the speed of preparing and delivering each order.

McDonald’s pioneered Drive Thru F&B retailing in Thailand, and today it leads the market with 26 Drive Thru outlets across Bangkok. KFC currently ranks second, and other fast-food and coffee shop brands, such as Starbucks, Burger King and Dunkin Donuts, are seeking to expand their Drive Thru presence across suburban districts of the Thai capital.

The primary locations are Ratchapruk Road, Phaholyothin Road and Rama 2 Road, which count Bangkok‘s highest concentrations of Drive Thru F&B outlets. Bangna-Trad Road is expected to be the next hot spot, as the area counts high car traffic volumes, and an abundance of land exists to accommodate new development.

Key issues to consider

Drive Thru dining is also attracting interest from brands yet to establish their market presence, but developers and operators in Thailand must consider key logistical and operational issues. For F&B operators, getting the food and drink menu right is crucial as customers have high expectations both in terms of menu range and the speed of order processing and delivery.

For developers planning to build drive-thru outlets to let, it is important to ensure the location and venue layout will attract interest from high-profile F&B brands. In a sense, this echoes the ‘developer beware’ caveat that applies to all forms to retail asset development. In a less mature retail market like Thailand, many well-capitalised individuals and families want to enter the retail sector without adequate market knowledge and experience. Some of these investors have developed retail properties without studying demand developments for both retailers and consumers. This has resulted in under-performing assets being created that require significant extra funds and time to turn around.

Another factor to consider is that F&B brands have different requirements for a Drive Thru retail venue. Currently, all of Bangkok’s Drive Thru outlets are owned and operated by F&B brands, rather than franchisees, but there is no “one size fits all” format. McDonald and KFC’s outlets, for instance, require a three-window station, whereas Starbucks requires only two windows. Developers must identify a prospective occupier first, and then understand the preferred operating requirements before designing and building the Drive Thru property.

Siwanart Srisomsup, Retail Manager at JLL Bangkok, thinks that “despite growing popularity of drive-thrus, demand for letting space in shopping centres is unlikely to see any significant impact from this trend. Most of the F&B retailers operating Drive Thrus will continue to open traditional outlets in shopping centres. There are fewer fast food brands who are looking at opening outlets in prime shopping centres where occupancy costs are relatively higher and operating hours are less flexible.”

“While operators of neighborhood malls need leading F&B brands

as tenants, more F&B brands prefer having their drive-thru as

a part of a neighborhood mall than opening a traditional outlet

inside the mall.”Siwanart Srisomsup, JLL, Thailand

10 JLL | Retail Intelligence

BANGKOK

1.0%RETAIL SALES GROWTH

(NOMINAL, Y-O-Y)

3.0CURRENT RETAIL STOCK

(MIL SQM)

14.9%NEW SUPPLY FORECAST

(9M2016 TO 2020)

FAST FACTS

RENTAL VALUE(USD PSM PM)

54

3.25%RENTAL GROWTH

(Y-O-Y)

HIGHLIGHTS

Leasing Deal Sephora EmQuartier745 sqm

RENTS

• Continual strong leasing demand for choice locations in the mall, especially from international retailers, have supported rental growth. Many top centres have substantial waiting lists from tenants seeking to secure space, but are limited by existing landlord contractual obligations.

• Driven by investor interest, capital values outpaced rental growth which led market yields to compress marginally by -2 bps to 12.5%.

OUTLOOK

• Show DC, Bangkok’s first purely tourism oriented centre, with a net lettable area of 78,000 sqm, is due for completion in 2Q16. It boasts of a number of new-to-market brands including Lotte Duty Free.

• Additionally, the renovation of Siam Discovery (26,500 sqm) scheduled to complete in 2Q16, is expected to host many new-to-market international fashion retailers.

• Despite limited future projects from major players in 2016, a large amount of investment has been allocated by major developers for the refurbishment of older existing retail centres. This should sustain the growth in rents and capital values going forward.

DEMAND

• Demand for prime grade retail space in 1Q16 was driven by strong pre-commitments at the recently opened Crystal Veranda.

• International retailers continued to show strong interest in entering the Bangkok market. In 1Q16, at least three internationally recognised fashion retailers are fitting out their first store in Bangkok, including ETRO, Hackett, and Brooks Brothers.

NEW

SUPPLY

• Crystal Veranda, a high-end 16,166 sqm community mall in a high income residential area in the Inner North submarket completed in the quarter, bringing Prime Grade total stock to 3,004,325 sqm in 1Q16. The mall is largely lifestyle-oriented, caters to families living in the immediate catchment.

• Retail operators continue to invest in existing assets, undertaking renovations to increase competitiveness. Central Pattana PCL recently announced setting aside THB 7 billion for their asset enhancement programme across the country from now to 2018. Other major players such as Siam Future PCL have a number of malls undergoing renovations and expansions as well.

image credit: @isantiago13 image credit: @kimmuhovicsmakeup


Leasing Deal UniqloGandaria City2,300 sqm

image credit: @martinoulinou image credit: @cynhoho

JAKARTA


(NOMINAL, Y-O-Y)


(MIL SQM)


(9M2016 TO 2020)

9.2%RENTAL GROWTH

(Y-O-Y)

FAST FACTS

RENTAL VALUE(USD PSM PM)

56

HIGHLIGHTS

OUTLOOK

• Only one new completion, Central Park Extension, is expected to boost total stock by around 44,000 sqm in 2016. The low vacancy environment means that demand is likely to be supply-driven in 2016 with F&B being the most active.

• A lack of available assets in core Jakarta may divert the attention of investors to opportunities in Greater Jakarta and other cities throughout Indonesia.

DEMAND

• For three consecutive quarters, net absorption in this market has been driven by activity in Lippo St. Moritz Phase II, the most recent completion in the prime retail market. F&B continues to be the most active segment with local and international F&B tenants expanding in malls throughout the city.

RENTS

• Despite the low vacancy rates and a thin supply schedule, recent annual rental increments have been weak. This is partly attributable to the strong dominance by large retail groups with a plethora of brands that have been bargaining hard.

• Few en-bloc investment transactions have been recorded in recent years. Given the current supply and demand dynamics and strong demographic fundamentals, many landlords remained unwilling to offload their assets in 1Q16. Interest from investors remained strong.

SUPPLY

• The moratorium on stand-alone retail development in the CBD has been in place since 2011. While this is not the official policy, the Jakarta governor is selective in signing off on new projects. All recent prime retail supply has been mixed-use developments with the most recent completion in 3Q15 - Lippo St. Moritz Phase II. No new projects were delivered in 1Q16.


Leasing Deal 4Fingers Crispy ChickenMid Valley Megamall126 sqm

image credit: @merli_sansan image credit: @saresshawei

KUALA LUMPUR


(NOMINAL, Y-O-Y)


(MIL SQM)


(9M2016 TO 2020)

-1.48%RENTAL GROWTH

(Y-O-Y)

FAST FACTS

AVERAGE RENT(USD PSM PM)

87

HIGHLIGHTS

SUPPLY

• Supply was marked by the completion of one new mall in the suburbs – Da:Men located along USJ 1 in Selangor, adding a total of 39,100 sqm to the existing suburban stock.

• However, the mall is only 60% occupied at the time of opening.

OUTLOOK

• Given limited supply in the pipeline, especially in the city centre, rents are expected to remain stable, supported by the potential increase in tourism arising from the recently introduced visa waiver programme for Chinese travellers.

• The weaker Malaysian Ringgit could also help improve tourist spending in key malls in the city center.

• Large expected supply in the suburban locations, however, would likely increase competition, putting downside pressure on rents.

DEMAND

• Demand for prime retail space was supported by the newly opened Da:Men shopping mall.

• Prime malls continued to enjoy a healthy occupancy of over 90%, although those lacking in niche marketing effort, faced pressure as they struggled to attract shoppers.

• F&B and fashion retailers continue to dominate leasing activities.

RENTS

• Both prime and suburban retail rents remain stable. Growth has been clipped largely on the back of weaker economy and poor retail sales.

• Investment interest remained subdued and cautious, keeping capital values stable. Yields remained stable on a quarterly basis.


Leasing Deal Aston Martin ShowroomW Fifth Avenue Building800 sqm

image credit: @damian_pugh image credit: @domalmazan

MANILA


(NOMINAL, Y-O-Y)


(MIL SQM)


(9M2016 TO 2020)

8.9%RENTAL GROWTH

(Y-O-Y)

FAST FACTS


47

HIGHLIGHTS

SUPPLY

• Three new developments – Venice Grand Canal Mall, Uptown Place Mall, and Uptown Parade – were completed this quarter, adding some 140,000 sqm of retail space to the existing stock.

• Vacancy rates remain at a healthy level, rising marginally to 2.5%, due in part to the recent completions.

OUTLOOK

• Rental growth to sustain, supported by continual entry and expansion of local and foreign retailers seeking to tap into the growing affluence.

• Positive overseas Filipino remittances and robust expansion in the offshoring and outsourcing sector are likely to support growth in local consumption.

DEMAND

• Retail demand remained robust on the back of the entry and expansion of foreign and local retailers, especially F&B, in key shopping malls in metro Manila.

• Some foreign retailers in the F&B business opened their first stores in the Philippines include Pepperonia Pizzeria from Singapore, Morganfields from Malaysia, and The Dessert Kitchen from Hong Kong.

RENTS

• Robust retail demand supported rental growth while capital value kept pace, albeit weaker, allowing an 8 bps expansion in investment yield to 9.1%.


Leasing Deal HamleysPlaza Singapura1,115 sqm

image credit: @sasaaa530 image credit: @gordon61

SINGAPORE

-3.2%RETAIL SALES GROWTH

(NOMINAL, Y-O-Y)


(MIL SQM)


(9M2016 TO 2020)

-0.9%RENTAL GROWTH

(Y-O-Y)

FAST FACTS


344

HIGHLIGHTS

DEMAND

• Excluding motor vehicles, total retail sales in January 2016 declined compared to a year ago. Non-necessity trades including apparel and watches and jewellery led the fall, deflating retailers’ business confidence.

• Mainly affected by the notable drop in spending by tourists from Indonesia and Australia, total tourism receipts declined despite the mild rebound in total tourist arrivals and this heightened retailers’ fear of waning sales. Thus, expansion by retailers and the entry of newcomers from discretionary trades remained limited in 1Q16.

SUPPLY

• A higher number of small-to-medium scale shops closed their businesses in 1Q16, blaming high operating costs and difficulty in attracting consumers. To cope with exits and to improve tenants’ sales, some landlords introduced more pop-up stores and offered flexible lease terms to bring in new retailers who are testing the market.

• Despite a difficult retail climate, malls in areas with lower retail penetration tended to do well. For instance, Waterway Point, a large-scale suburban mall in the centre of the densely populated but under-serviced Punggol Estate, opened on a high note in 1Q16. The family-oriented and well-rounded tenant mix was also a key to the mall’s success.

RENTS

• Hurt by high labour costs and falling sales, tenants hoped for a change in the rental terms towards a lower base rent and a higher percentage of turnover structure. But many landlords were not ready for the change. Consolidation of underperforming stores and the gap in retailers’ and landlords’ expectations led to accelerating rental correction.

• With prime malls tightly held by large funds and developers with deep pockets and no signs of pressure to divest core retail assets, investment sales of malls were sporadic. The lack of strata-titled retail project launches further exacerbated the decline in overall retail property sales. The decline in capital value matched the decline in rent.

OUTLOOK

• Although some of the near-term supply secured substantial pre-commitments, tenant consolidation and slow take-up in smaller-scale projects are likely to continue, inflating the average vacancy level in 1Q16.

• With the tenant-landlord expectation disparity likely to stay, rents are projected to fall further.

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Follow us on @JLLRetailCitiesThanks to all of our image contributors.

@yung_ebola @mysterydaniels

@gordon61

@saresshawei

@gavin_foo

@sasaaa530

@martinoulinou

@isantiago13 @domalmazan

@ioanna_bella @damian_pugh

@joan229


NEW SUPPLY FORECAST

(9M2016 TO 2020)

RENTAL GROWTH Y-O-Y IN LOCAL

CURRENCY

RETAIL SALES (NOMINAL,

Y-O-Y)

CURRENT RETAIL STOCK

(MIL SQM)


FAST FACTS

14.9% 3.25%1.0% 3.0 54Bangkok

6.3% 9.2%9.9% 1.5 56Jakarta

Shopping CentresNote 1: Rents are average net face rents for prime level locations in the best prime shopping centres and on a net lettable area basis. Net face rents are calculated excluding the tenant outgoing costs and landlord incentives are not taken into account. The most expensive locations in shopping centres can garner rents in excess of three or four times that of the average mall level. Limited available space due to strong demand and a lack of new additions in the most expensive & central locations contribute greatly to the rental gap. A higher level of sales activity and increased brand exposure are core reasons retailers seek these locations.High StreetsNote 1: Rents are average net face rents for the high street(s) and on a net lettable area basis. SourcesRetail sales: various government websites, JLL Research April 2016. Retail stock and supply additions: JLL (Real Estate Intelligence Services), 1Q16

-3.2% 1.1% -0.9%0.75 344Singapore

1.2% 14.4% 8.9%4.8 47Manila

7.5% 34.1% -1.48%1.1 87Kuala Lumpur

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Jones Lang LaSalle

© 2016 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.

PhilippinesAntonio [email protected]

SingaporeLee Siew LingLeasing [email protected]

SingaporeGary NonisLeasing [email protected]

IndonesiaJames [email protected]

Shaping decisions through retail intelligence

In the fast-moving world of retail and leisure it’s all about solutions delivered with higher performance in mind. It comes down to global knowledge, and people with real passion and knowledge of the industry. We call it retail intelligence.

In Asia Pacific, we have leased over 130 million square feet of retail space on behalf of owners and retailers and consulted on over 220 million square feet of retail space for developers and investors. We also manage more than 72 million square feet of space for more than 250 retail properties.

We strive to be best in class, acting as a genuine partner for your business and ensuring you stay one step ahead in a rapidly changing market.

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