Cushman & Wakefield : Retail Rents Rise in the World’s Most Expensive Shopping Destinations

TORONTO--()--Cushman & Wakefield:

  • Causeway Bay, Hong Kong overtakes Fifth Avenue, New York as the most expensive retail destination in the world, with the latter losing first spot for the first time in 11 years.
  • Bloor Street in Toronto has remains the 20th most expensive globally.
  • Avenue des Champs-Élysées, Paris witnessed strong rental growth and replaced Ginza Tokyo in third place.
  • Global retail rents remained resilient overall, recording a 4.5% average increase for prime locations.
  • International luxury retailers continue to drive demand for space in the top destinations.
  • South America showed the strongest rental uplift by region, with prime rents increasing by 11.6%.

“Despite a backdrop of a slower global economy and continued uncertainty – notably surrounding the euro zone – global prime retail markets have proved generally resilient over the year to June, with rental growth driven in particular by a strong performance in Asia and the Americas.” according to Cushman & Wakefield’s latest Main Streets Across the World report launched today.

Of the 326 prime locations in 62 countries surveyed for the report, a total of 147 saw rents increasing with just 49 (15%) experiencing rental declines – compared with (19%) in 2011.


The world’s ten most expensive retail locations in each country (2012)

Rank 2012   Rank 2011   Country   City   Street   US$/sq ft/year   €/sq m/year   % change

local measure

1 2 Hong Kong (China) Hong Kong Causeway Bay 2,630 22,307 34.9
2 1 USA New York Fifth Avenue 2,500 21,204 11.1
3 5 France Paris Avenue des Champs-Élysées 1,129 9,573 30.0
4 3 Japan Tokyo Ginza 1,057 8,962 0.0
5 4 Australia Sydney Pitt Street Mall 952 8,077 0.0
6 6 UK London New Bond Street 936 7,942 3.1
7 8 Switzerland Zurich Bahnhofstrasse 854 7,243 8.7
8 7 Italy Milan Via Montenapoleone 825 7,000 2.9
9 9 South Korea Seoul Myeongdong 686 5,822 16.0
10 10 Germany Munich Kaufingerstraße 495 4,200 6.1

Source: Cushman & Wakefield (full ranking contained in the report)


Hong Kong’s Causeway Bay driven by a surge in demand and leasing activity experienced a 34.9% hike in rental values to US$2,630 sq ft overtaking Fifth Avenue in New York at US$2,500 sq ft, as the most expensive retail destination in the world – the first time Fifth Avenue has not been top in 11 years.

The biggest climber in the top ten was Avenue des Champs-Élysées in Paris at US$1,129 sq.ft, which jumped two places into third spot, leaving Ginza Tokyo in fourth place US$ 1,057 sq ft.

Luxury retailing continues to fuel trading and rental growth across prime pitches of the global market. Luxury retailers are competing for the most coveted shopping destinations, exerting upward pressure on prime rental values. Despite recent slower sales growth, the luxury sector will remain resilient and continue to play a vital and prominent role in driving overall performance in the world’s premier locations.

Martin Mahmuti - Analyst, European Research Group: “Looking ahead, the main drivers behind global growth are not expected to shift significantly – with growing structural demand in tier 1 locations, market globalization and luxury expansion in key developments.”

John Strachan - Head of Global Retail Services, “There has been the usual jostling for the top positions between Hong Kong and New York but of course the real message here is the unfaltering advance of the top global cities, fuelled by a shortage of supply and the interest of international brands.”

AMERICAS

The Americas showed the strongest rental growth of all regions. Prime rental rises in North American locations were driven by the strong performance of the US (16.3%) and Mexico (11.5%), while Canadian values recording a marginal uplift.

Conditions in the US retail market improved over the year as sales and leasing activity picked up –albeit mainly in the prime segment. However, further falls in vacancy rates and limited new supply on the market could see the overall rental rate increase over the next 12 months for the first time since 2008.

Matt Winn, Senior Managing Director, Head of Retail Services, Americas “The last year saw continued strong rental growth across the Americas led by the recovering economy and strong demographic trends in the US and Latin America. Given current demand for urban units from a broad range of retailers we expect this trend to continue in prime areas as well as secondary locations throughout the region. Supply constraints in key markets may in fact limit growth going forward as demand remains higher than available supply in many major markets.”

John Crombie, Senior Managing Director, C&W, Canada - “The Canadian retail market is a great place to be right now. Demand for retail space has remained steady over the last 12 months with growth recorded in selected prime locations resulting in a slight fall in the overall retail vacancy rate. Despite keen interest from both American and international retailers, there has been a slight slowdown in leasing activity for foreign retailers as entry costs have proven to be higher than expected and new sites harder to find for new retailers considering Canada as a place to open their business.”

That said, with activity from American retailers like J. Crew and Brooks Brothers to name a few, Toronto’s Bloor Street rents has gone up by 1.6%, and remains the 20th most expensive street in the world for retail space.

Montreal’s Ste-Catherine West’s revamped street appeal has helped attract a larger number of retailers looking for a prime space and rents have increased by an average of 12.5 per cent.

Of all Canadian main streets, Robson Street in Vancouver is the only area that has seen a decrease in rental rates and activity, falling from $240/square foot in 2011 to $220/square foot in 2012 with most luxury retailers choosing to locate on neighboring Alberni Street.

Development continues in both the urban and suburban areas of major Canadian cities, with many mixed-use projects either planned or under construction. A number of retailers are resizing their stores to a smaller format, and vacancies in big boxes have increased. While this trend is expected to continue over the next 12 months; it will also present some opportunities for retailers looking for ‘ready-to-use’ properties as opposed to new construction.

ASIA PACIFIC

Despite a slight deceleration in regional growth rate in Asia Pacific to 8.6% compared with 12.2% in 2011, occupier demand in the region remained robust, with retailers eager to tap into a generally younger but increasingly affluent middle-class. Asia Pacific also contained five of the 10 most expensive global locations and operators continued to compete for the limited prime space in the coveted destinations of Hong Kong and South Korea.

The highlight of this year’s survey was Hong Kong with advance 21.8% as a result of extremely active demand from a diverse group of new international retailers, expansion plans from existing brands and very limited availability. Indeed, notwithstanding slowing economic activity, retailers continued to see the market as the ideal launching platform into mainland China.

EMEA

The retail sectors performance across the region remained deeply polarized over the past year, with premier locations in most large cities attracting good demand from international luxury brands. At the same time, even in stronger cities, secondary pitches are still struggling on the back of rising availability and weak consumer sentiment.

EMEA prime values were up by 1.7% in the year to June, boosted by the continued demand from international fashion brands and the luxury sector. Prime rents in 25 of the 31 European markets surveyed saw rents remain stable or increase, whilst they fell noticeably in countries affected by austerity measures e.g. Greece (17.1%), Ireland (15.1%) Hungary (13.3%), or by increasing supply e.g. Bulgaria (7.7%).

Avenue des Champs-Élysées, Paris was again the most expensive retail location in the EMEA region, recording rental growth of 30.0% over the year and widening the rental difference on second placed New Bond Street, London.

Pierre Raynal, Head of Retail Agency France, said “Over the past few months, strong international retailer demand continued to boost the main thoroughfares of Paris. The Champs-Elysées in particular, which in 2011 saw the grand openings of Marks & Spencer, Abercrombie & Fitch and Banana Republic has remained in the spotlight in 2012 with the opening of Levi Strauss, Kusmi Tea and the refurbishment of Hugo Boss flagship stores. With tourist numbers expected to grow further in the next few years Paris, one of Europe’s key gateway cities, will continue to benefit from strong retailer demand.”

About Cushman & Wakefield
Cushman & Wakefield is the world’s largest privately-held commercial real estate services firm. The company advises and represents clients on all aspects of property occupancy and investment, and has established a preeminent position in the world’s major markets, as evidenced by its frequent involvement in many of the most significant property leases, sales and assignments.

Founded in 1917 it has 243 offices in 60 countries and more than 14,000 employees. It offers a complete range of services for all property types, including leasing, sales and acquisitions, equity, debt and structured finance, corporate finance and investment banking, corporate services, property management, facilities management, project management, consulting and valuation. The firm has more than $4 billion in assets under management through its wholly-owned subsidiary Cushman & Wakefield Investors. A recognized leader in local and global real estate research, the firm publishes its market information and studies online at www.cushmanwakefield.com/knowledge.

Contacts

Mansfield Communications
Odette Coleman, 416-315-6343
Odette@mcipr.com

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Retail Rents Rise in the World’s Most Expensive Shopping Destinations

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Contacts

Mansfield Communications
Odette Coleman, 416-315-6343
Odette@mcipr.com