Hong Kong is the world’s most expensive city for global retailers, while prime rents in major markets such as New York, Paris and London continue to reach record-breaking levels, according to new research from global property advisor CBRE Group, Inc.
CBRE’s quarterly ranking of 97 prime retail locations/markets across the globe shows that competition in the world’s leading cities is getting even stronger. This demand is being fueled by high-end retailers willing to pay record rents for the most coveted shops, while development levels are at historic lows resulting in a shortage of prime retail space.
Hong Kong (US$4,334 per sq. ft. per annum) is the world’s most expensive location for prime retail rents by a substantial margin, followed by New York (US$3,300 per sq. ft. per annum), Paris (US$1,452 per sq. ft. per annum) and London (US$1,356 per sq. ft. per annum).
strength of luxury retailers versus those that serve the mid-market. CBRE’s research provides further evidence that prime retail rents are strong in most markets and rose further in key global markets like New York, London and Tokyo,” Raymond G. Torto, Global Chairman of Research, CBRE, said in a statement.
“In many locations, prime retail rents have been buoyed by a shortage of available space in prime market areas and fervent demand from luxury brands. This lack of prime space has pushed some retailers toward secondary assets and markets. With construction levels at or near their troughs in many locations, this trend will likely continue in 2014.”
Retailer demand in Hong Kong is focused on prime locations rather than secondary streets. The most sought-after prime streets are Russell Street in Causeway Bay, Canton Road in Tsim Sha Tsui, and Queen’s Road Central in Central. These locations – which all recorded very tight vacancy – continue to attract both global and local retailers.
New York’s Fifth Avenue continued its ascent into record territory during Q4 2013, with the luxury thoroughfare’s average asking rent rising 4.8% quarter-over-quarter to an all-time high of US$3,300 per sq. ft. per annum. For a 5,000-sq.-ft. space, that would translate to US$16.5 million per year in rent. Other prime luxury streets in the northeast U.S. also saw strong growth, including Newbury Street in Boston (up 6.7% quarter-over-quarter) and Walnut Street in Philadelphia (up 5.8% quarter-over-quarter) reporting the largest increases.
The retail market in France was characterized by heavy polarization, with substantial demand focused on prime space, especially in and around Paris. Significant interest from international retailers for the limited amount of available prime locations in Paris has resulted in steady rent growth over the past two years, with Paris’ average prime asking rent up 80% since Q1 2012. Sustained demand from international retailers will continue to support high street rents in 2014.
Strong demand for prime retail locations in London has pushed rents to record levels.
Competition for high street retail space in Sydney remains strong due to healthy demand from international retailers and limited availability.
A recovery in the Japanese economy, a rebound in the stock market and anticipated growth in wages has translated into the highest consumer confidence since 2005. Rental growth in Moscow high streets remained stable throughout 2013. Demand for space remains steady, but the structure of the retail market is changing. The ratio of fashion retailers in high streets continues to decrease as the majority of Muscovites prefer purchasing clothes and footwear in shopping malls. Moscow is also set to see a significant number of new large scale shopping malls being delivered to the market.
Global retailers continue to seek prime retail space in Beijing, with designer brands 3.1 Phillip Lim and Cheap Monday opening their first standalone stores in China.