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RELIABLE DATA HARD TO FIND IN ASIA, EXPO SPEAKERS SAY

By Edmund Mander

Doing business in Asia can be like driving in fog with a dirty windshield.” So said Peter Holland, director of Melbourne, Australia-based Urbis JHD Advisors, last month at ICSC’s Asia Expo, in Singapore.

In China and other parts of the region, census and other government data are inaccurate, making it imperative that Western developers and retailers entering Asia conduct or commission independent research, said Holland and other research specialists. “Even the GDP figures are wrong sometimes,” Holland said.

Going into a market relying only on government research is “a massive leap of faith,” agreed Sebastian Skiff, a managing director in Cushman & Wakefield’s South Korea office.

Sometimes it is a matter of deliberate obfuscation by governments intent on making their economies look rosier than is warranted. One panelist, only partly joking, even questioned the oft-quoted claim that there are 1.3 billion people in China. “Every government forecast you have to question,” Holland said. “There’s always an agenda.” Korea is especially difficult for foreigners, one speaker said. “Databases are very protected, and they’re in Korean,” said Richard D.B. Talbot, president of Talbot Consultants International, Toronto.

One exception is Japan — officials there are scrupulous about the accuracy and thoroughness of their research, said Brent A. Seay, Wal-Mart’s director of development for Asia, Europe and Canada.

Another major problem is the abundance of rules that no one bothers to put into writing, said Karen Eidsvik, the regional director for Asia of the Subway sandwich chain, which is expanding throughout the region.

But even if Western executives can do little about statistical and regulatory environments that remain opaque, they can at least clean their windshields by doing their own research, panelists said. “We tend to do it ourselves,” Seay said. “Or we’ll hire a third party.”

Doing this can entail a wide range of inquiry, from highly technical satellite mapping to the more mundane door-to-door surveys, said Talbot, whose firm has conducted retail research for shopping center developers and airport builders around the world.

One consequence of the lack of reliable data is that developers often build shopping centers that are too big or otherwise inappropriate for their markets. Even Wal-Mart has made missteps, said Seay, such as building a format that doesn’t quite fit the surroundings.

Up to now, a significant number of “so-called developers” have been in fact just trader companies without experience in shopping center development or interest in long-term ownership, said Skiff. “That’s why we’ve seen centers doing very badly.”

This will change, though, as REITs get more involved in retail development and help bring competence and transparency, speakers said. There are now 39 REITs in Asia (excluding Japan), amounting to some $17 billion in market capitalization. That’s about 25 times what the level was when the first Asian REIT was established in 2002, said Michael T. Smith, a managing director in Goldman Sachs’ Singapore office.

Consolidation will follow, Smith said, predicting that there will be about 100 REITs in 2010, but only half of that by 2015. Mergers and acquisitions will bring discipline to the market and lower the cost of capital. All of which will bring both cleaner windshields and a lifting of the fog, he and others said.