After seeing prime retail rents rise by over 25% over the last 18 months, Moscow is now the most expensive retail location in Europe and the second most expensive in the world, according to the Global Retail Destinations Ranking from CB Richard Ellis (CBRE). Demand for prime space in Moscow has been rising rapidly as retailers look to take advantage of rising consumer spending, particularly on luxury goods.

The CBRE Global Retail Destinations Report ranks 85 of the leading global retail markets across EMEA, Asia Pacific and The Americas in terms of rental values for stores in prime retail destinations. New York’s Fifth Avenue remains the world’s premier retail destination with rental values reaching €11,400/sqm/annum, over 40% higher than Moscow, which ranks in second place. Also making the top five in the rankings are London, Paris and Tokyo, with Hong Kong in sixth position.

It is, however, European markets that dominate the overall ranking, accounting for 16 of the top 20 most expensive destinations across the globe (and 37 of the top 50). Peter Gold, Head of the CBRE EMEA Cross Border Retail business, explains, “It is not just local retailers who are driving up rents. We are seeing premium global retailers, particularly in the fashion sector, aggressively expanding their footprint across Europe. With prime locations in short supply, rents are under significant upward pressure as retailers compete to secure the best of them.”

In Western Europe some of the strongest rental growth was seen in Barcelona and Madrid, with increases of 36% and 32%, respectively, over the past 18 months. Dublin, currently seventh on the global ranking, has also seen prime rents rise by 18% over the same period. “The strength of many of the European economies and rising consumer spending in the UK, Spain and Ireland, has generated rapid rises in retail rents across many European cities,” comments Rebecca Canty, EMEA Retail Analyst at CBRE.

In the Central and Eastern European (CEE) markets, consumer spending is growing at 4% to 6%, well above the EU-15 average. This ongoing growth, coupled with the desire of premier retailers to secure market share and establish their brand in CEE, continues to encourage retailers into the market.

Rents have been rising sharply in CEE, with tenants competing to secure the best space in the newly-developed shopping centres across the region, of which there are more set to arrive. In a separate CBRE survey of 225 cross-border global retailers, 62% of those surveyed now have a presence in CEE. Poland is identified as one of the most successful markets, having secured almost one third of the retailer respondents.

“While rents in CEE may look high, they need to be viewed in the context of other factors such as significantly lower staffing costs,” continues Gold. “The growth potential across the CEE region is phenomenal for both new entrants and those that have already established a beachhead in one market to expand their footprint into other countries.”