New York still world's most expensive retail destination
New York City remains the world’s most expensive retail destination as retailers focus on the major fashion capitals pushing global rents in prime locations even higher, according to the latest CB Richard Ellis (CBRE) Global Retail MarketView.
The increased demand for the limited amount of prime retail stores led to a rise in global rents in the first quarter (Q1) of 2011. In Asia, rents rose steadily, underpinned by the ongoing expansion of international luxury and ‘fast fashion’ brands. Rental growth in the Americas is slowing, but remains positive, while Europe, Middle East, and Africa (EMEA) experienced a marginal increase over the last quarter. In general, there is still downward pressure on rents in secondary markets.
New York’s Fifth Avenue remains the world’s most expensive high street destination, with rental values reaching US$1,900 per sq ft per annum - an increase of more than 10% in the last 12 months. There was little change in the CBRE global retail rent rankings from the previous quarter. The notable exception was Hong Kong, which moved up to second position and became the fastest growing market in Q1 2011 following a rental hike of 46% quarter-on-quarter due to a number of high-profile leasing deals completed at key locations on Pedder Street.
Sydney (US$1,301 sq ft per annum) dropped to third position due to flat growth year-on-year (y-o-y), while London’s West End (US$909 sq ft per annum) held fourth position despite rental growth remaining flat y-o-y. Zurich rose to fifth position after experiencing rental growth of 9% (US$829 sq ft per annum).
The overall total of rents recorded by CBRE grew by 1.9% in Q1 and by 3.8% y-o-y. Rental levels grew by 6.9% y-o-y in the Americas as spending increased and consumer confidence and employment levels improved. Asia Pacific experienced rental growth of 11.1% y-o-y despite enduring a series of natural disasters during the first quarter such as the Christchurch earthquake, floods in Queensland, and the Japan earthquake and tsunami. Although there has undoubtedly been an economic impact, this has so far been confined to the directly affected markets.
In contrast, rents in EMEA grew by just 0.5% y-o-y as concern about the PIIGS (Portugal, Ireland, Italy, Greece, Spain) economies increased and high unemployment continued to affect consumer expenditure growth.
Ray Torto, Global Chief Economist, CB Richard Ellis, commented:
“The recovery in the global economy is multi-speed. Economic growth continues to be strong in Latin America and the Asia Pacific, but is much weaker in Europe and North America. In the developed economies, the ability to maintain interest rates at a level that will encourage sustainable economic growth, while also keeping a lid on inflation, will be the key challenge.
“It remains a testing time for retailers, particularly in developed markets, where fewer new shopping venues are making it more difficult for retailers to access the prime space they require. Not only is this putting upward pressure on rents in the most sought after locations, it is also forcing retailers to extend their search criteria and consider taking non-prime locations.”
Commenting on trends in the EMEA region, Peter Gold, Head of Cross-Border Retail - EMEA, CB Richard Ellis, said:
“Europe’s economic recovery continues, but the overall rate of growth is still low and retail sales were flat on the whole in the first quarter of 2011. Consumer confidence has fallen slightly in Q1 and remains just below the long-term average; however, there are significant differences by country, reflecting the general economic situation in each market.
“In general, retailers are targeting a wide range of markets, with demand particularly high in Germany and Poland. In spite of the challenging trading conditions, occupier demand for prime pitches in key European cities is still strong and this includes markets that are facing some of the most challenging economic conditions such as Ireland and Spain. It is arguably an ideal time for retailers to access prime space in these markets as rents are low.”