Los Angeles — Hong Kong is by far the world’s most expensive city for global retailers, but prime rents in New York City, London, Tokyo and Zurich are on the rise, according to research from CBRE Group, Inc.
CBRE’s second quarter 2013 ranking of the top 10 prime global retail markets saw little change relative to previous quarters; however, four of the top 10 markets — New York City, London, Zurich and Tokyo — saw quarterly increases in prime retail rents. Only one market saw a quarterly increase in the first quarter.
Low construction levels and fierce competition among retailers for the best locations fuel rental growth in these major cities.
Hong Kong topped the rankings by a substantial margin at $4,328 per square foot per annum. New York City ranked second with $3,050 per square foot per annum. Third place Paris came in at $1,220 per square foot per annum.
Despite the high rents, retailers continue to establish a presence in Hong King, seeking to benefit from the market’s growing luxury retail scene. CBRE found that 51 new retailers opened Hong Kong stores last year.
New York City’s prime retail rents rose 2.7% in the second quarter, signifying a 22% annual increase relative to last year. Demand from international retailers remains strong in New York City, and tourism continues to drive strong retail sales.
In London ($1,156 per square foot per annum), improving consumer confidence, robust sales and increased foot traffic have collectively fuelled tenant demand. In particular, the supply and demand imbalance on New Bond Street and Old Bond Street resulted in prime rents for Central London increasing by 9.1% quarter-over-quarter and 20% year-over-year as measured in local currency.
Preference for prime space continues to drive prime rents in Zurich ($896 per square foot per annum) where rents increased 2.2% quarter-over quarter and 5.6% year-over-year.
The tight supply of prime space, strengthening confidence and fierce competition for prime locations contributed to a 2.0% quarter-over-quarter local currency rental increase in Tokyo.