Savills World Research1H 2017

Asian Cities Report Taiwan Retail 1H 2017

savills.com.hk/research savills.com.hk/research 01 Asian Cities Report | Taiwan Retail

GRAPH 1 Department stores brands, shoes and cosmetic products Retail sales growth rate by sector, 2009– Taiwan’s GDP growth reached 1.5% in as major tenants on the ground fl oor, tenants with attractive window displays 2016 2016, increasing from 0.72% last year due to the improving fi gures in private are being welcomed. Followed by Department store sales Supermarkets Convenience stores Hypermarkets Harley-Davidson, Tesla Motors made 10% consumption, investment and exports. The economic recovery has had a its entrance into the Taiwan market by positive effect on the retail sector. opening its fi rst store (approximately 8% Retail sales registered an historical high 200 sq m) on the ground fl oor of of NT$4.1 trillion in 2016, increasing ShinKong Mitsukoshi A11. 6% by 1.9% year-on-year (YoY), with the main contributors being supermarkets Operators are looking to target young customers aged 20 to 35 by 4% (9.3% YoY), auto sales (5.4% YoY) and convenience stores (4.7% YoY). using affordable luxury brands as anchor tenants on the ground fl oor, 2% Total sales for department stores such as Michael Kors, Coach and increased by 4.5% YoY to NT$331.1 Longchamp. In addition, following 0% the emerging fi tness trend in the past 2009 2010 2011 2012 2013 2014 2015 2016 billion in 2016. However, the annual sales growth for three major few years, the retail space for sports department store groups, including products has been enlarged. Jordan Source: Ministry of Economic Affairs ShinKong Mitsukoshi, Pacifi c Sogo launched its largest Asia fl agship store and Far Eastern, was stagnant. Only in Breeze Song Gao. Retailers have the Breeze Center group has seen also used sports equipment such as running tracks in their renovations, GRAPH 2 a 25% growth in sales as a result of or set up indoor basketball courts Annual sales of department stores, 2013– the launch of Breeze Song Gao at the end of 2015, and the renovation of to enhance customers’ shopping 2016 its Nanjing Store. However, they did experience. not reach their sales target in 2016. 2013 2014 2015 2016 90 In order to overcome this obstacle, Supply Four new projects entered the market 80 operators are changing and improving tenant mix more regularly, and during 2H/2016 and 1H/2017, adding 70 adopting new strategies, including: a total of 215,000 sq m of retail GFA 60 to the market. Three projects were

50 Allocating more space to food and located outside City. In order beverage (F&B). Retailers have broken to differentiate themselves from 40 NT$ bilion with past traditions to replace female existing competitors, operators have 30 clothing and accessories with F&B on been focusing on creating a thematic 20 lower fl oors. For example, ShinKong experience for customers and

10 Mitsukoshi Store, featuring strengthening their entertainment and the highest annual sales revenue leisure functions. Recent new supply 0 ShinKong Mitsukoshi Far Eastern Breeze Center among all stores, remodeled its second has included: fl oor into F&B space and thereby lifted Source: Ministry of Economic Affairs, Savills Research & Consultancy the F&B proportion of revenue to 12%.  Phase II, launched A11 Store in Taipei City also followed at the end of 2016, contributed this strategy and its F&B sector now around 13,400 sq m of retail GFA to accounts for 22% of total revenue. the market, introducing 65 brands. GRAPH 3 Different from Phase I, Phase II New supply of department stores, retail malls Offering exclusive dining options can decreased the percentage of luxury and outlets, 2000–2018F signifi cantly increase footfall, and brands and focuses more on offering long waiting lines sometimes bring outdoor leisure goods and sports Department stores Retail malls Outlets additional marketing advantages for products, with major tenants including 350,000 operators. Adidas and The North Face. 300,000 Operators are competing to appeal to Phase III, planned to complete in 2020, 250,000 famous restaurants or cafes to open is going to strengthen its entertainment 200,000 their fi rst store in department stores, facilities by containing a movie

sq m such as Jamie’s Italian, Honolulu theatre and a 15,000-sq m aquarium, 150,000 Coffee Shop in ShinKong Mitsukoshi working with Yokohama Hakkeijima, a

100,000 A11, and Cafe Florian ShinKong Japanese theme park operator. Mitsukoshi A9, which attract signifi cant 50,000 media coverage. Next to Lihpao Land Theme Park

0 and Fullon Hotel in the suburb area Retailers are now focusing on their of Taichung City, the main purpose ability to attract footfall, rather than behind the Lihpao Outlet is to provide

Source: Savills Research & Consultancy solely revenue. In addition to luxury customers with more comprehensive

02 1H 2017

services during their vacation. With their footprints. TABLE 1 200 brands and 73,000 sq m of indoor Major future retail projects, 2018–2021 and outdoor retail space, Lihpao Different from the diffi culty that most Outlet is expected to reach an annual retailers are facing, the growth of revenue of NT$6 billion. the F&B sector is stronger. Several Retail Completion international restaurant brands entered Property Operator Zone GFA year , close to Caoya the Taiwan market, including ICHIRAN, (sq m) Road Station of the MRT, Isaac toast & Coffee, Jamie’s Italian Breeze Center Xinyi district, Breeze Center 47,850 2018 is a joint venture project between and Lady M. However, the gradually Nanshan Taipei City The Taroko Sport and MobilityLand, increasing minimum wage and the Mitsui Outlet Park Wuqi district, Mitsui Fudosan 65,000 2018 a Japanese motorsport racing amended labour standard law made Taichung Taichung City facility operator. A third of the land labour costs for F&B, which usually Far Eastern Xinyi district, area in this 8.7-hectare project is has longer opening hours and higher Far Eastern A13 46,200 2019 designed for Suzuka Circuit Park; the cost from salaries, rise signifi cantly. Development Store Taipei City remaining land will be a shopping As new restaurants join the market, Nangang Mitsui Shopping Mitsui Fudosan district, 165,000 2021 mall, providing a total retail space competition in the restaurant industry Park LaLaport Taipei CIty of 115,500 sq m for 220 brands. is getting more intense. Concentrating on highlighting its sport and entertainment elements Street shop Source: Taiwan Tourism Bureau, Savills Research & Consultancy and child-friendly concept, its annual High rent levels (approximate sales revenue is projected to reach NT$5,000 to NT$7,500 per sq m) and NT$5 billion in 2016. Notable tenants the rise of the Xinyi district brought include H&M, Studio A and Wesport, challenges to the Zhongxiao E. Road GRAPH 4 offering baseball batting cages, shopping area, which was ranked indoor golf and a skating facility. alongside as the most Number of stores for selected international popular shopping areas in Taipei fashion brands, 2010–2016 Demand City. Miss Sofi , DHC, SO NICE, and 2010 2011 2012 2013 2014 2015 2016 Due to the emergence of online sales, Nine West (mainly women’s retail 70 expansion strategies for local retailers, brands) closed their street shops in as well as international fast-fashion the Zhongxiao E. Road shopping area 60 brands, became conservative. Store in the past two year. The vacancy 50 expansion rates for fast-fashion situation has been increasing gradually brands such as Uniqlo, Zara, GU, Gap since the second half of 2015, and 40 and H&M in 2016 were much slower the vacancy rate remained at a high compared with 2014 and 2015, with level of over 10%. However, individual 30 No. of stores only 17 new stores opened, mainly in landlords who have owned their 20 major cities in the middle or south of property for a long time can usually Taiwan. H&M is the only fast-fashion tolerate the vacancy loss and only offer 10 retailer to have launched a fl agship a minor rent correction. 0 store in Taipei City in the past 12 Uniqlo Zara GU Gap H&M Forever 21 months. They entered the Taiwan While the Zhongxiao E. Road district market in 2015 and opened 11 stores suffered from the high vacancy Source: Savills Research & Consultancy in two year. At the end of 2016, H&M rate, Ximending ranked as the No.1 opened its largest Asian fl agship shopping area, due to the growth of store in the Ximending shopping area, independent travellers. Mainly relying one of the city’s most bustling retail on local customers and international TABLE 2 destinations, covering a total retail area independent travellers, Ximending Signifi cant retail transactions, 2016–Q1/2017 of approximately 5,000 sq m over fi ve was not as affected by the decrease fl oors. of group tourists from China since Tsai Ing Wen took offi ce in 2016. Several Amount Area Property Sport and fi tness activities, such retail brands opened their fl agship Date Property Location (NT$ mil) (sq m) Type as running and going to the gym, stores in this shopping area, including have recently became more popular H&M, E-Land Group, New Balance B1 & G/F, No. 7 among young adults (20-40 years), and Jordan. We expect the leading NET Minquan High Jul 2016 Minquan W. Road, 521 944 W. Store street seeing sustained growth in the sports position of Ximending to continue Taipei City footwear and apparel market. In due to the completion of the Taoyuan G/F & 2/F No. 101, addition to increasing the retail space International Airport MRT line, which Zhongxiao 101 Sec. 5, Zhongxiao High Oct 2016 480 637 of sports brands in department stores, will make Ximending the fi rst stop in Store E. Road, Taipei street retailers, including Adidas, New Taiwan for international independent City Balance, Jordon and Momentum, a travellers.  Whole block No. 62, Xining S. High Jan 2017 retail building in 2,200 3,917 local sport goods distributors, are Road, Taipei City street Ximending opening plenty of new street shops. The Ximending and Zhongxiao E. Road districts have seen the expansion of Source: Savills Research & Consultancy

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