Retail Rents in New York, London, Tokyo and Zurich on the Rise, by CBRE
Hong Kong is by far the world’s most expensive city for global retailers today, but prime rents in New York, London, Tokyo and Zurich also are rising, according to new research from global property advisor CBRE Group, Inc.
CBRE’s quarterly ranking (second quarter 2013) of the top 10 prime global retail markets saw little change relative to previous quarters. Yet 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 are fuelling this growth, leading to record-breaking rents in many global markets.
“Global retailers continue to desire premier retail locations in gateway cities because of the global shoppers those corridors attract and the value delivered for brand visibility,” said Anthony Buono, executive managing director, Americas Retail Services, CBRE.
Hong Kong (US$4,328 per square foot per annum) tops the rankings by a substantial margin, with New York ($3,050 per square foot per annum) in second position. New York’s prime rents are about $1,200 per square foot below Hong Kong’s. A similarly large spread of more than $1,800 per square foot per annum exists between New York and third-place Paris ($1,220 per square foot per annum).
Despite its high rents, retailers seeking to benefit from Hong Kong’s growing luxury retail scene continue to establish a presence there. According to CBRE research, 51 new retailers opened stores in Hong Kong last year. The city has the highest representation of luxury retailers of all global markets.
“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,” commented Joe Lin, CBRE’s executive director retail, Hong Kong. “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 percent quarterly growth rate in prime retail rent levels, signifying a 22 percent annual increase relative to last year. Demand from international retailers remained strong in New York, and tourism levels continued to drive strong retail sales activity.
In London, 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 percent quarter-over-quarter and 20 percent year-over-year, as measured in local currency.
Preference for prime space continues to impact prime rents in Zurich, where rents increased 2.2 percent quarter-over-quarter and 5.6 percent year-over-year.
The tight supply of prime space, as well as the gradually strengthening confidence of occupiers, contributed to a 2 percent quarter-over-quarter local currency rental increase in Tokyo. Because many foreign retailers view Tokyo as the gateway to Asia, competition for prime locations across the city remained fierce. Domestic retailers also have expanded their presence in Tokyo.
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