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London: the #1 International Retail Market

By Vivian Hendriksz

28 Apr 2016

Retail |REPORT

London - Despite fears of a BREXIT, the city of London has managed to hold onto its title as the global retail powerhouse for international retailing. London beat out competition from other cities such as Hong Kong by retaining the highest presence of international retailers, making it the number one retail market in the world.

London ranks as the number one 'European retail powerhouse'

London continues to act as a magnet for new, international brands seeking out the perfect location to open a store overseas, according to the latest report from Jones Lang LaSalle (JLL): Destination Retail Report 2016. It's appeal has been linked to a number of factors, including its market size, maturity and high degree of transparency. The capital of the UK has long been seen by many retailers as the entry point to Europe, with several fashion retailers such as J.Crew, Club Monaco and Kate Spade opening their debut stores in the city over the past year.

The West End retail area, which consists of Oxford Street, Regent Street, Bond Street and Covent Garden form the largest concentration of retail in Europe. However, due to the substantial premium demand on rental prices in the area, many other retail areas in region have flourished including Carnaby District, Seven Dials, Dover Street, Shoreditch and Brompton Cross. "Structural change is sweeping the retail industry as technology and e-commerce platforms become more sophisticated," commented James Brown, Director of Global Retail Research for JLL. "However, demand for the right physical space, in the right location, is stronger than ever."

The Middle East is poised as the next 'hotbed' for retail growth

However, although London is the number one retail market, the JLL's Destination Retail report, which looks at the top cities across the globe for retailing, is dominated by cities in Asia Pacific and the Middle East. One-third of the top 15 global cities ranked in the report are located in the Middle East, including Dubai #4, Kuwait City #9 and Abu Dhabi #11. These cities are emerging as business and travel hubs and increasingly attracting the attention of global retail brands. In addition, the cities strong tourism appeal also plays a vital role in increasing the flow of foreign money, a key driver for international retail spend.

Compared to London, whose retail rental prices continue to increase, these cities in the Middle East have large amounts of affordable retail space, which is supported by franchise structures, presenting viable options for international retailers to move into the region while reducing their operational risk at entry. The report also highlights the difference in maturity in the domestic market, which allows international brands to enter the market without the risk of facing too much competition from domestic brands.

Asia Pacific sheer size beckons international retailers

"Borders are becoming less of an issue for retailers pursuing opportunities overseas and we're seeing the global retail landscape shifting fast to accommodate the change," added Brown. Asia Pacific's main cities' sheer market size is rapidly becoming a compelling feature for retailers to expand into the region. With the emergence of a burgeoning middle class and increasing levels of affluence, a wider range of retailer are now eyeing up the possibilities. Although Hong Kong remains Asia's leading shopping destination, with top brands from the luxury to the fast fashion end of the spectrum, other cities are catching up to modern retail markets in Europe and the US.

As the second largest economy in the world, China's key cities of Shanghai and Beijing have undergone a big transformation over the past two decades and are now firmly cemented on international retailers' minds as key locations for brand exposure and test markets. Vital cities outside of Greater China which are also gaining much attention from international retailers include Tokyo, Singapore, Seoul, Osaka and Bangkok.

The US remains the 'Land of Opportunity' for international retailers

Although the United States remains one of the most advance retail markets in the world and can seem daunting to international retailers, there is still potential for growth in the Land of Opportunity. The US has more retail space than any other country: 12.8 billion square feet, with many options for entry in either malls, shopping centers or power centers. The entry cities of New York, San Francisco, Miami, Chicago and Los Angeles may be brimming with international brands already, but the remaining 137 key cities remain largely untapped by global labels.

"Expansion into new markets is catching on quicker than ever, but not without risk. International retailers that are focused on measured and balanced growth will find that the world's mega-retail cities are a productive opportunity," concluded David Zoba, Chairman of JLL's Global Retail Leasing Board.

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