Los Angeles — Hong Kong is by far the world’s most expensive city for global retailers. Even so, prime rents in major global markets such as New York, Paris and London continue to break records, according to new research from global property advisor CBRE Group.
CBRE’s quarterly ranking of 97 prime retail markets around the world shows that competition in leading cities is growing ever stronger. High-end retailers willing to pay record rents for the most coveted shop space are fueling the rising rents, while historically low development levels are limiting 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. The most sought after locations in Hong Kong include Russell Street in Causeway Bay, Canton Road in Tsim Sha Tsui and Queen’s Road Central in Central.
New York City’s Fifth Avenue continued its ascent into record territory during fourth quarter 2013. Average asking rents there rose 4.8% quarter-over-quarter to an all-time high of US$3,300. That means a 5,000-sq.-ft. space would cost US$16.5 million per year in rent.
In Paris, significant interest from international retailers for limited space has produced steady rent growth over the past two years, to US$1,452. The city’s average prime asking rent has risen 80% since first quarter 2012. CBRE predicts that sustained demand from international retailers will continue to support high street rents in 2014.
Ditto London. Limited space and high demand has pushed rents for prime locations to record levels — US$1,356. However, the U.K. market has polarized, with poorer secondary shopping centers and high streets suffering increasing vacancies and falling rents.
In Australia, two cities made the CBRE top ten most expensive, according to CBRE. Sydney, number 6, has seen rents rise to US$871 per sq. ft. In Melbourne, ranked number 9, rents have reached US$732 per sq. ft.
Tokyo remains one of the key gateway cities for retailers that are new to the Asia Pacific region. Rents there top out at US$850. With luxury brands seeking to expand and domestic retailers willing to try new locations, leasing activity has spread to peripheral areas such as the Jinnan are in Shibuya.
Rental growth in Moscow’s prime areas remained stable during 2013, with rents of US$739. Demand for space remains steady, but the structure of the retail market is changing. The number of fashion retailers in high streets is decreasing, as Muscovites now prefer purchasing clothes and footwear in shopping malls. In fact, a number of new malls will soon open.
Global retailers continue to seek prime space in Beijing, with designer brands 3.1 Phillip Lim and Cheap Monday opening their first standalone stores in China. Prime Beijing space is going for US$681 per sq. ft. today. Fast fashion brands are seeking opportunities in core submarkets, while food and beverage operators are increasingly popular with mall landlords, especially those in secondary locations due to their ability to attract customers.