Why Luxury Brands are Keen on Southeast Asia

In 2022, the global luxury retail market had an 11% year-on-year (YoY) increase in new stores opening, and Asia had a 12% increase. China had a 41% share of the new stores and 17% of global sales in 2022.  

Nick Bradstreet, Head of Asia Pacific Retail, Savills commented: “Luxury brands have come to realise that they need to diversify their portfolios and Southeast Asia is a natural choice for this diversification. Stand out markets include Singapore, Thailand, and Viet Nam.” 

Singapore is a more mature market with many existing luxury players. However, it still presents interesting opportunities for new and upcoming names, particularly as Singapore’s retail sales have grown significantly over recent months. According to the retail sales forecast by Statista, Singapore’s luxury retail sales in 2023 are expected to reach US$4 billion. Although demand remains high, limited stock puts pressure on prime rent. 

Brands are showing significant interest in Viet Nam and Thailand because of their growing economies, expanding HNWI populations, and the favourable attitude of the young middle class toward luxury goods.   

Hoang Dieu Trang, Senior Director of Commercial Leasing, Savills Ha Noi said: “Given that movement and tourism in China and Hong Kong has been limited by the pandemic, luxury brands are looking to expand in emerging markets. Although luxury brands are limited in Viet Nam, demand is rising.” 

Viet Nam’s Luxury Retail Market  

According to the World Bank, GDP in Viet Nam is forecast to grow by 6.3% in 2023. Viet Nam’s national development plan targets growth of 7% per years between 2021 and 2030. By 2050, GDP per capita at current prices will be US$27,000 – US$32,000. The General Statistics Office (GSO) highlighted that domestic consumption is healthy, and Retail Sales of Goods and Services (RSGS) in 4M/2023 increased by 26.7% compared to the same period in 2019.  

According to Statista, luxury retail in Viet Nam will achieve revenue of US$957.20 million in 2023, and annual growth between 2023 and 2028 will average 3.2%. Rising demand is brining brands to Viet Nam, and Ha Noi recently welcomed stores by Dior, Louis Vuitton, Tiffany & Co. and Berluti.

Viet Nam also has luxury hotels and branded residences by leading hotel brands such as The Ritz-Carlton, Four Seasons and Fairmont. New luxurious residential and hospitality properties could support the expansion of luxury retail.

In London, St. Regis Hotel opened on the corner of Conduit Street and Bond Street is helping to strengthen the appeal of this part of Bond Stret to luxury retail brands as well as raise the profile of the southern end of Conduit Street. In Milan, the opening of hotel Portrait Milano in Corso Venezia is helping to extend the luxury pitch with a number of luxury brands now happy to explore opportunities within the vicinity of the hotel.  

A similar trend is being observed in Madrid with the opening of the country’s first Four Seasons Hotel and Private Residences close to Gran Via in the city, as the wider development includes a luxury retail area known as Galería Canalejas with recently secured tenants including Louis Vuitton and Jimmy Choo. 

“Ha Noi expects new luxury hotels soon, including Four Seasons, Fairmont, Waldorf Astoria and Ritz Carlton. This will be positive in the city attracting luxury brands,” said Hoang Dieu Trang, Senior Manager of Commercial Leasing, Savills Ha Noi.  

Ms Trang pointed out that in regional markets, brands often place their stores on the main shopping street or in large shopping centres, close to other notable brands. In Ha Noi, brands want frontages on main streets in the centre with prime locations, large leasable areas, and proximity to affluent customers. Hoan Kiem District is preferred; however, stock is incredibly limited.  

Retail spaces in Ha Noi sometimes fall short of the prerequisites luxury brands have, such as a large leasable area, technical and legal transparency, and the ability to secure long-term leases. 

However, projects by foreign developers often present a long-term vision with a good tenant strategy and high levels of investment, which appeals to luxury brands. 

“To capitalise on the luxury retail sector, Viet Nam needs more viable retail stock. Developers should work on retail properties that meet international standards and the requirements of luxury retailers,” Trang added.  

Conclusion 

Savills Retail Team delivers extensive market knowledge and have a successful track record of working with luxury brands looking to enter the market. Find the retail space for your brand. For details, please contact Ms Hoang Dieu Trang.