18
November
2008
|
00:00
Europe/London

Retail Rents Grow in Global Strategic Destinations

CB Richard Ellis’ latest Global Retail Rents Survey points to polarisation between primary and secondary retail locations during the economic downturn.

Retailers are focusing on some of the major global fashion capitals, pushing rents in the world’s most expensive retail locations even higher, according to CB Richard Ellis’ (CBRE) latest Global Retail Rents Survey. Some smaller and secondary retail cities continue to see strong levels of growth, however global fashion capitals such as Hong Kong, London and Los Angeles now sit alongside these markets in the company’s top 25 fastest growing retail rents index, whilst simultaneously claiming some of the most expensive retail rents in the world.

Despite deteriorating economic conditions, the retail sector has to date continued to perform relatively well. Half of the markets surveyed saw retail rental growth in the past year (ending Q3 2008), with 65% of those seeing increases over the last six months. New York’s 5th Avenue remains the world’s most expensive retail destination, with rental values reaching €16,817/sqm/annum, more than 75% higher than Hong Kong, the second most expensive location. Also making the top five most expensive retail destinations globally are Moscow, London and Tokyo.

Demand is coming from retailers that are performing well in the current market – such as luxury brands – but also from retailers who are reining in wider expansion plans in response to weakening consumer spending and focusing on longer-term strategic locations as opposed to new destinations.

Although rents have risen in many key cities, the slowdown in consumer demand has inevitably struck some retail markets around the world resulting in falling rents. In cities such as Tokyo and Madrid, where rents fell by 5% in the past six months, retailers are now beginning to take advantage of their covenant strength and landlords are becoming more open to rental negotiations. Despite growing downward pressure, retail rents in these cities remain some of the highest in the world (Tokyo #5, Madrid #21).

Ray Torto, Chief Global Economist, CBRE, said: “It is easy to assume that falling consumer confidence and financial market turmoil across the globe are striking all retail stores, but the CBRE survey together with sale figures from retailers is showing that we have a barbell market. Our analysis indicates that the upper end is holding up well and the same is true for lower-end, non-discretionary retailers. ”

EMEA continues to dominate the most expensive retail hot spots, containing 33 of the top 50 premier destinations. Cities in the EMEA region also dominate the fastest-growing retail rents. Fifteen of the top 25 fastest-growing retail destinations sit in EMEA, with Tel Aviv, Oporto, Abu Dhabi, Valencia and Lyon topping the global list.

Peter Gold, Head of Cross-Border Retail in the EMEA region for CBRE, said: “Although growth rates are slowing in response to deteriorating economic conditions, demand for retail space at the prime end of the market, particularly in fashion hot spots like New York and London, continues to propel rental growth in many cities. Many retailers are opting for ‘prime pitch’ space in major retail cities in an attempt to secure the best long-term prospects for their business in an uncertain market.

“Changing economic conditions are also impacting the types of retailers driving demand. Many private retailers still have cash to fuel their expansion plans; luxury and value-led brands have announced positive sales growth and are maintaining strategic expansion; and many retailers are jumping on opportunities to fill new gaps in the shifting marketplace. It will therefore be those retailers who have a particular point of differentiation within their market – either based on product or price – which are likely to succeed despite the tougher conditions. And it is these who will consequently grow market share and ultimately help to sustain rents in key cities.”
North American cities continue to dominate the most expensive rents in the Americas region. Los Angeles at tenth position in the global ranking follows New York as the next most expensive destination, with San Francisco, Toronto and Vancouver being the other cities to make the top 50. Miami, Montreal, Philadelphia and Washington join Los Angeles and New York in the fastest growing index, although demand continues to be restricted to prime pitches.

Asia Pacific’s presence in the top rankings continues to be prominent, holding seven of the top 20 most expensive destinations. The scarcity of prime units continued to push rental increases in many markets, with Guangzhou, Shanghai, Hong Kong and Singapore all registering growth over the past six months. Guangzhou continues to be the most expensive Chinese city, having jumped significantly in the ranking from 22nd in Q1 2008 to 13th in the current ranking.

Top 25 Fastest Growing Destinations for Retail Rents

Rank City Region 6-month growth (local)
1 Tel Aviv EMEA 33.3%
2 Oporto EMEA 33.3%
3 Abu Dhabi EMEA 25.3%
4 Valencia EMEA 25.3%
5 Lyon EMEA 16.7%
6 Bucharest EMEA 16.7%
7 Guangzhou ASIA PACIFIC 16.3%
8 Miami AMERICAS 13.8%
9 Shanghai ASIA PACIFIC 12.9%
10 Hong Kong ASIA PACIFIC 11.1%
11 New York AMERICAS 10.0%
12 Montreal AMERICAS 9.4%
13 Philadelphia AMERICAS 8.3%
14 Amsterdam EMEA 8.0%
15 London EMEA 7.1%
16 Berlin EMEA 6.8%
17 Brussels EMEA 6.7%
18 Oslo EMEA 6.7%
19 Zagreb EMEA 6.3%
20 Prague EMEA 5.8%
21 Athens EMEA 5.5%
22 Singapore ASIA PACIFIC 5.2%
23 Los Angeles AMERICAS 4.4%
24 Washington, DC AMERICAS 3.7%
25 Utrecht EMEA 2.9%

Top 50 Most Expensive Global Retail Destinations

Rank City Region $/sqft/annum €/sq m/annum Q1 2008 Ranking
1 New York AMERICAS 2,200 16,817 1
2 Hong Kong ASIA PACIFIC 1,236 9,448 3
3 Moscow EMEA 1,047 8,000 2
4 London EMEA 834 6,378 6
5 Tokyo ASIA PACIFIC 829 6,334 4
6 Paris EMEA 818 6,250 5
7 Sydney ASIA PACIFIC 712 5,445 7
8 Zurich EMEA 623 4,759 8
9 Dublin EMEA 613 4,688 9
10 Los Angeles AMERICAS 600 4,586 11
11 Brisbane ASIA PACIFIC 573 4,378 10
12 Chicago AMERICAS 500 3,822 16
13 Guangzhou ASIA PACIFIC 493 3,772 22
14 Milan EMEA 484 3,700 12
15 Munich EMEA 471 3,600 13
16 Rome EMEA 458 3,500 15
17 Singapore ASIA PACIFIC 455 3,481 19
18 Melbourne ASIA PACIFIC 452 3,452 14
19 San Francisco AMERICAS 450 3,440 18
20 St Petersburg EMEA 446 3,409 20
21 Madrid EMEA 392 3,000 17
22 Frankfurt EMEA 392 3,000 21
23 Berlin EMEA 369 2,820 24
24 Amsterdam EMEA 353 2,700 28
24 Barcelona EMEA 349 2,664 23
24 Dusseldorf EMEA 345 2,640 24
27 Hamburg EMEA 345 2,640 24
28 Shanghai ASIA PACIFIC 337 2,573 37
29 Athens EMEA 309 2,363 30
30 Vienna EMEA 306 2,340 29
31 New Delhi ASIA PACIFIC 297 2,270 27
32 Beijing ASIA PACIFIC 296 2,264 38
33 Taipei ASIA PACIFIC 293 2,241 34
34 Geneva EMEA 291 2,221 31
35 Lille EMEA 288 2,200 32
36 Toronto AMERICAS 283 2,164 36
37 Prague EMEA 283 2,160 35
38 Copenhagen EMEA 281 2,145 33
39 Lyon EMEA 275 2,100 43
40 Leeds EMEA 255 1,946 39
41 Oslo EMEA 252 1,929 42
42 Liverpool EMEA 250 1,914 40
42 Manchester EMEA 250 1,914 40
44 Valencia EMEA 246 1,880 52
45 Rotterdam EMEA 235 1,800 43
45 Utrecht EMEA 235 1,800 46
47 Edinburgh EMEA 234 1,786 45
48 Birmingham EMEA 229 1,754 47
49 Belfast EMEA 229 1,754 47
50 Vancouver AMERICAS 226 1,731 51



Global Rents Survey
Global Rents Survey