Hong Kong continues to rank as the world’s most expensive global retail market, recording prime rents nearly 150 percent higher than New York City and more than 400 percent higher than London and Paris, according to new research from CBRE Group, Inc. (NYSE:CBG)
CBRE’s quarterly survey (Q1 2013), which tracks the top 10 most expensive prime global retail markets, reveals that strong demand from international retailers, coupled with a modest supply pipeline, has led to record-high prime rental rates. Leading the pack, Hong Kong continues to rank in a rental class distinctly above its global peers, recording prime rental rates during Q1 2013 of $4,328 per square foot per annum.
While markets such as Hong Kong, New York City, London and Paris did not record increases in prime rents this quarter, these cities have exhibited resilience due to international retailers’ continued longer-term strategic expansion strategies, which evidence a distinct preference for prime space in the best locations in these markets.
Prime Retail Rent Ranking by US$ per Sq. Ft. per Annum Basis
Joe Lin, Executive Director Retail, Hong Kong, CBRE, commented:
“Prime rents in Hong Kong stand at record highs as tenant demand is steady and inquiries from retailers looking to enter or increase their footprint in the city remain strong. Given that space is so expensive in Hong Kong’s prime shopping streets largely driven by continued demand from international luxury brands, many traditional retailers have moved into more “niche” secondary retail locations as they still want to be in the market, but have been priced out of the prime space.”
Ranking as the second most expensive global retail market, New York City ($2,970 per sq. ft.) welcomed several new national and global retailers in 2012 that were attracted by the market’s strong international tourism features. The pipeline for new retail space in New York City is low. However, a significant amount of prime space is available along Fifth Avenue between 49th and 59th Street.
Europe’s prime retail markets of London ($1,053 per sq. ft.) and Paris ($1,050 per sq. ft.) are holding steady, largely due to scarcity of supply and correspondingly high rent levels. As witnessed in Hong Kong, many new retailers to the Central London market have been forced to consider alternative locations. This is most apparent on Bond Street, where retailers have looked to alternative locations in Mayfair. Examples include the fashion retailer Oscar de la Renta, which has now opened a 2,000 sq. ft. store on Mount Street, with Celine also taking an 8,000 sq. ft. unit a few doors down. The openings represent the first UK store for each.
The tight supply of prime space throughout the Asia Pacific region helped maintain rent levels in Sydney, Melbourne, Beijing and Tokyo. In Sydney ($1,018 per sq. ft.), demand from international retailers (especially from the US) is high with many new brands set to enter the market in 2013.
Pacific markets gained prominence in the global retail rankings with Brisbane ($739 per sq. ft.) and Melbourne ($851 per sq. ft.) now ranking among the most expensive prime retail markets. Thanks to strong turnover and a limited supply forecast for Brisbane’s Queen Street Mall, prime rents as measured in local currency jumped 15% quarter-over-quarter. As a result, Brisbane’s prime retail rent ranking rose two positions to ninth place. Not only has Brisbane’s mining and other natural resources sectors supported the local economy, population growth is also serving to boost expectations for future retail growth prospects. As such, rental growth is expected to continue in line with the current trend.
Raymond Torto, CBRE’s Global Chief Economist, commented:
“Prime retail rents across the most expensive global markets have held firm against a backdrop of scarce supply and preference for prime space. Despite subdued retail sales growth and strained consumer sentiments, international retailers remain focused on long-term growth strategies that have resulted in store expansions across many key global markets such as New York City, London and Moscow. However, at the current high levels, retailers are considering “off” prime or secondary locations and showing a reluctance to pay record high rates.”
About CBRE Group, Inc.
CBRE 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 and investment firm (in terms of 2012 revenue). The Company has approximately 37,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CBRE 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. Please visit our website at www.cbre.com.