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New York Still World’s Most Expensive Retail Location as Prime Rents Begin to Stabilize Across Key Markets

Increasing Differences Between the “Best and the Rest” in Retail Locations

Los Angeles – December 2, 2009 – Prime retail rents began to stabilize in many markets across the world in the third quarter (Q3) of 2009, as economic and retail indicators started to show signs of greater stability and retailer confidence gained positive momentum. Retail rents globally fell by an average of 1% from the second quarter to the third quarter of 2009, according to the latest CB Richard Ellis (CBRE) Global MarketView on the retail sector.

New York's reign as the world's most expensive retail market continued in Q3 2009 despite a 25% decline in rents over the past 12 months. Prime New York retail rents ended the quarter at $1,640 per sq. ft. per annum. Hong Kong and Paris retained their places as second and third in the global rankings, with rents of $976 per sq. ft. and $857 per sq. ft. per annum respectively. Interestingly, prime retail markets in Hong Kong, Paris, Sydney and London have demonstrated resilience to the global economic crisis, with stable rents over the past 12 months.

Sydney has moved up the global rankings into fourth position; however this is primarily due to the strengthening of the Australian dollar relative to the US dollar. In contrast, Tokyo has seen an 18% decline in rents over the same period, but nevertheless maintained its ranking as fifth most expensive market globally.

"Prime rents in premier locations are showing signs of stability as the best locations in the best markets continue to attract a variety of retailers," said Anthony Buono, Executive Managing Director of CBRE Retail Services in the Americas. "There is increasing differentiation between the 'best and the rest.'"

"Although consumers continue to take a cautious approach to spending, consumer confidence has been slowly recovering and is in positive territory in some economies," added Peter Gold, Head of Cross-Border Retail in the Europe, Middle East and Africa (EMEA) region for CB Richard Ellis. "There are undoubtedly more challenges ahead for many retailers, but retailer confidence has also picked up over the course of the year and expansion into key mature markets and prime locations remains firmly on the agenda across many sectors, including grocery and value clothing retailers."

Americas
Lower interest rates and government infrastructure spending and incentives have kept consumer spending relatively stable in the Americas but down compared to a year ago. Retail market fundamentals have weakened overall, but not to the same extent as the office and industrial sectors. The region's retail vacancy rates have increased marginally, as some retailers delay expansion and undertake strategic downsizing, but generally there have not been any drastic changes to the retail property landscape in Q3 2009. U.S. cities continue to lead the most expensive retail rents in the Americas region. Los Angeles and Chicago made the top 20 global ranking at 11th and 15th position respectively, following New York as the most expensive global market.

Europe, Middle East & Africa
The EMEA region continues to dominate the world's most expensive retail markets, containing nine of the top 20 most expensive destinations. Paris, London and Moscow have emerged as the top three markets respectively in the Q3 2009 ranking. The majority of markets saw a degree of stabilization in prime rents over the summer, although the EU-27 Retail Rent Index decreased by 0.8% in Q3 2009, a decline of 4.0% year-on-year. Vacancy levels are generally low in top locations across the region, yet the definition of 'prime' has tightened in many markets. Retailers continue to demand incentives including turnover-based rents, where they feel they are in a strong negotiating position. Interestingly, with development pipelines of new shopping centers being cut across many markets, some retailers are now concerned about a future shortage of expansion opportunities in the coming years, particularly in emerging markets.

Asia Pacific
The retail sector in the Asia Pacific region is recovering faster and better than expected, as government programs and strong economic growth in many markets helped to restore consumer confidence. Hong Kong still ranks as the world's second most expensive retail rental market, with values of $976 per sq. ft. per annum. Prime retail rents vary significantly across the different Asia markets, but in Q3 2009 retail rents in most cities either declined at a slower rate, stabilized, or showed a slight up-tick. However, the threat of supply-side risk remains significant in certain cities in Mainland China, Singapore and India, where large amounts of shopping mall construction are expected to be delivered in the coming years. In the Pacific region, the retail sector has been surprisingly resilient this cycle, with low vacancy, strong demand and mostly stable rents. 

Top 20 Most Expensive Retail Markets – Q3 2009

Rank

 

City

Rent Q3 2009

US$ Sq Ft p.a

Rent Q3 2009

€ Sq M p.a

Rank  Q2 2009

1

New York

 1,640

 12,062

1

2

Hong Kong

 976

 7,177

2

3

Paris

 857

 6,300

3

4

Sydney

 796

 5,859

7

5

Tokyo

 774

 5,694

5

6

London

 756

 5,561

4

7

Moscow

 735

 5,407

6

8

Zurich

 673

 4,947

8

9

Brisbane

 644

 4,738

9

10

Dublin

 543

 3,995

11

11

Los Angeles

 540

 3,972

10

12

Melbourne

 505

 3,714

16

13

Milan

 503

 3,700

14

14

Guangzhou

 502

 3,691

12

15

Chicago

 500

 3,677

13

16

Munich

 489

 3,600

15

17

Rome

 476

 3,500

17

18

Singapore

 448

 3,296

19

19

Frankfurt

 441

 3,240

18

20

Berlin

 383

 2,820

20

Source: CB Richard Ellis

A full copy of the report can be obtained here.

DEFINITIONS
The prime retail rents quoted in this publication represent the typical "achievable" open market headline rent which an international retail chain would be expected to pay for a ground floor retail unit (either high street or shopping centre depending on the market) of up to 2150 sq. ft. of the highest quality and specification and in the best location in a given market.

The quoted rents reflect the level at which relevant transactions are being completed in the market at the time but need not be exactly identical to any of them, particularly if deal flow is very limited or made up of unusual one-off deals. In these circumstances, the quoted figure will be more hypothetical, based on expert opinion of market conditions, but the same criteria on building size and specification apply.

The figures exclude any leasing incentives or "key money" (premium, or initial payment, to secure the right to occupy the unit).

To arrange to speak with a CBRE expert, please contact Robert McGrath at 212.984.8267 or robert.mcgrath@cbre.com.

About CB Richard Ellis

CB Richard Ellis Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world's largest commercial real estate services firm (in terms of 2008 revenue).  The Company has approximately 30,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CB Richard Ellis offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. CB Richard Ellis has been named a BusinessWeek 50 "best in class" company for three years in a row. Please visit our Web site at www.cbre.com.

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