New York Retains Position as World's Most Expensive Retail Destination
New York City remains the world’s most expensive shopping destination as retailers focus on the major fashion capitals, but as the eurozone crisis continues to impact consumer confidence, rents have leveled off in all global regions in the third quarter of 2011, according to new research from global property adviser CBRE.
Total retail rents at a global level were broadly flat quarter on quarter (-0.6%) in Q3 2011, with the Americas seeing a fall of 2.0% and rents unchanged in the Asia Pacific and Europe, Middle East, and Africa (EMEA) regions. This represents a significant slowdown from earlier in the year as retailers take a more cautious approach to expansion.
New York’s Fifth Avenue remains the world’s most expensive shopping destination, with rents remaining constant at US$1,900 per square foot per annum. The CBRE survey of the world’s most expensive global retail cities saw little change in Q3 2011 compared to the previous quarter. Hong Kong (US$1,695 sq ft per annum) remained in second position with annual rents in 2011 rising by 52.8% as the number of high-profile leasing deals completed at key locations on Pedder Street continued apace.
Sydney (US$1,224 sq ft per annum) retained third position in the rankings, while London (US$961 sq ft per annum) moved up one position to fourth from Q2 2011 as competition for prime locations in the city’s West End led to an annual rental increase of 5.6% in Q3 2011.
Despite the weakening consumer confidence levels seen in a wide range of global markets, retailers continued to expand their store networks to gain market share in Q3 2011. Asia in particular has seen significant levels of occupier demand in destinations such as Singapore, China and India, while retailers in the US and Western Europe, in general, remain more cautious. The US economy stalled in the first half of 2011, barely growing above 1.0%, while sovereign debt issues in Europe remain the biggest downside risk.
Ray Torto, Global Chief Economist, CBRE, commented:
“In spite of the uncertain economic outlook, retailers continue to expand their store networks. The emerging markets, particularly Asia, provide attractive opportunities for growth, although prime locations in Europe’s biggest cities are also attracting a high level of occupier demand, as consumers increasingly target major destinations with the widest choice of retailers. Overall, however, retailers have been taking a more cautious approach to expansion, resulting in flat rental growth across the globe in the third quarter – a considerable slowdown from earlier in the year.”
Commenting on trends in the EMEA region, Peter Gold, Head of Cross-Border Retail - EMEA, CBRE, said:
“Across Europe, falling consumer confidence and flat retail sales have resulted in more caution among retailers; however, occupier demand for prime space remains strong. Retailers that survived the recent recession are now well placed to grow their store networks and are doing so in a wide variety of markets, although the focus is firmly on prime space in major cities. Vacancy rates in most of these locations are zero and with little new shopping centre development due over the next two years, the key challenge for retailers is accessing prime space.”