Hong Kong is by far the world’s most expensive city for global retailers, but prime rents in New York, London, Tokyo and Zurich are on the rise, according to new research from global property advisor CBRE Group, Inc.
CBRE’s quarterly ranking (Q2 2013) of the top 10 prime global retail markets saw little change relative to previous quarters; however, four of the top 10 markets - New York, London, Zurich and Tokyo - saw quarterly increases in prime retail rents, compared with only one market during the previous quarter. Historically low construction levels and fierce retailer competition for the best locations is fuelling this growth, leading to record-breaking rents in many global markets.
Hong Kong (€35,756/sq m/year) tops the rankings by a substantial margin, with New York ($25,199/sq m/year) in second position posting prime rents €10,557 per sq m below Hong Kong. Similarly, a large spread of more than €15,000 per sq m per annum exists between New York and third-ranked Paris (€10,080/sq m/year).
Despite its high rents, retailers continue to establish a presence in Hong Kong, seeking to benefit from the market’s growing luxury retail scene. According to CBRE research, 51 new retailers opened stores in Hong Kong last year and the city has the highest representation of luxury retailers of all global markets.
Joe Lin, Executive Director Retail, Hong Kong, CBRE, commented: “Healthy tourist arrivals and lack of available space make finding an adequate unit in Hong Kong’s prime retail locations a major challenge for new and existing retailers. Units in prime locations with reasonable shop fronts and size rarely become available, leaving retailers with few choices. As such, preference for spaces with these characteristics continues to generate strong demand, supporting the market’s high - and rising - prime rent levels.”
New York displayed a 2.7% quarterly growth rate in prime retail rent levels, signifying a 22% annual increase relative to last year. Demand from international retailers remains strong in New York and tourism levels continue to drive strong retail sales activity.
In London (€9,554/sq m/year), 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.
“In the case of a ground floor unit of 200 sq m in the best High Street or Shopping Center location Prime Rent in Budapest is around €960/sq m/year”, Anita Csörgő, Head of Retail at CBRE Budapest commented. “Due to the fact that consumption and retail turnovers are starting to increase slightly this year and the lack of new supply coming into the market, I truly believe that rents have bottomed out, especially in class B and off A locations and that we will be seeing increases starting from 2014.”, Anita Csörgő added.
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