Global Retail Rents Fuelled by High-end Brands
The Japanese translation of this release was disseminated in Japan on the date above. Please note that the original version of this release was announced in English on February 20.
Hong Kong, February 20, 2014—Hong Kong is by far the world’s most expensive city for global retailers while prime rents in major markets such as New York, Paris and London continue to reach record-breaking levels, according to global property advisor CBRE Group, Inc’s Q4 2013 Global Retail Rents report.
CBRE’s quarterly ranking of 97 prime retail locations/markets across the globe shows that competition in the world’s leading cities is getting even stronger. This demand is being fuelled by high-end retailers willing to pay record rents for the most coveted shops, while development levels are at historic lows resulting in a shortage of prime retail space. For Asia, Hong Kong, Tokyo and Beijing feature in the global top ten.
“Asia’s retail centers continued to grow and rents continued to increase, with gateway cities like Hong Kong, Tokyo and Singapore attracting retailers new to the region, and retailers established in these centers beginning to spread into emerging markets. This is helping to increase competition for space particularly in prime areas,” said Sebastian Skiff, Executive Director, CBRE Retail.
Hong Kong (US$4,334 per sq. ft. per annum) is the world’s most expensive location for prime retail rents by a substantial margin, followed by New York (US$3,300 per sq. ft. per annum), Paris (US$1,452 per sq. ft. per annum) and London (US$1,356 per sq. ft. per annum). Hong Kong has held this position for the past two years.
“Russell Street in Causeway Bay, Hong Kong remains the most expensive place in the world for retail rents off the back of its very limited supply, low vacancy and availability, and the ongoing demand for retail space due to the influx of shoppers from mainland China,” said Mr. Skiff.
“Whilst generally speaking we still see strong demand for prime streets across Hong Kong, we are seeing rental growth levelling off, and flat to negative in secondary streets, with vacancies rising. There is likely to be an increase in new supply for the first time in many months but not all of this new stock will be suitable for the requirements of international brands and retailers. In fact, less than half of the new supply will be located in major retail districts, and the majority will be located on secondary streets that are less appealing to niche brands,” Mr. Skiff added. Around one million sq. ft. of new retail supply is expected to come on line in Hong Kong by the end of 2014.
“There has been a lot of discussion about the strength of luxury retailers versus those that serve the mid-market. CBRE’s research provides further evidence that prime retail is strong and the leading locations are even becoming stronger. New York, Paris and London have seen prime retail rents rise 11, 28 and 18 percent respectively year-over-year from levels that are already in the stratosphere,” said Raymond G. Torto, Global Chairman of Research, at CBRE.
“That said, due to this fervent demand from luxury brands, a lack of available space in the prime market areas, and the high rents being asked, we are now starting to see spillage into secondary assets and locations.”
Key Asia Centers Explained
For the three Asian centers that featured in the top ten globally, research showed that retailer demand in Hong Kong is focused on prime locations rather than secondary streets. The most sought-after prime streets are Russell Street in Causeway Bay, Canton Road in Tsim Sha Tsui, and Queen’s Road Central in Central. These locations—which all recorded very tight vacancy—continue to attract both global and local retailers.
A recovery in the Japanese economy, a rebound in the stock market and anticipated growth in wages has translated into the highest consumer confidence since 2005. Big ticket items in department stores and luxury products both reported promising sales growth. Tokyo remains one of the key gateway cities for retailers that are new to Asia Pacific. With luxury brands seeking to expand and domestic retailers willing to try new locations, leasing activity has spread to peripheral areas such as the Jinnan area in Shibuya.
Global retailers continue to seek prime retail space in Beijing with designer brands 3.1 Phillip Lim and Cheap Monday opening their first China standalone stores. Fast fashion brands meanwhile are seeking opportunities in core submarkets, while F&B operators are increasingly popular with landlords of shopping malls, especially those in secondary locations due to their ability to attract footfall.
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 2014 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 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.
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