Hong Kong ($4328 per sqft per annum) is by far the world’s most expensive city for global retailers, according to new research from CBRE Group.
Despite its high rents, retailers continue to establish a presence in Hong Kong, seeking to benefit from the market’s growing luxury retail scene.
According to CBRE research, 51 new retailers opened stores in Hong Kong last year and the city has the highest representation of luxury retailers of all global markets.
“Healthy tourist arrivals and lack of available space make finding an adequate unit in Hong Kong’s prime retail locations a major challenge for new and existing retailers,” said Joe Lin, executive director of retail, Hong Kong, CBRE.
“Units in prime locations with reasonable shop fronts and size rarely become available, leaving retailers with few choices. As such, preference for spaces with these characteristics continues to generate strong demand, supporting the market’s high – and rising – prime rent levels.”
New York ($3050 per sqft per annum) is the second most expensive city for retail rents. The city displayed a 2.7 per cent quarterly growth rate in prime retail rent levels, signifying a 22 per cent annual increase relative to last year. Demand from international retailers remains strong in New York and tourism levels continue to drive strong retail sales activity.
Ranking third is Paris ($1220 per sqft per annum), were prime rents remained stable.
Improving consumer confidence, robust sales and increased foot traffic have collectively fuelled tenant demand in London ($1156 per sqft per annum), the world’s fourth most expensive city for retailers.
Preference for prime space continues to impact prime rents in Zurich ($896 per sqft per annum) where rents increased 2.2 per cent quarter-over-quarter and 5.6 per cent year-over-year.
The tight supply of prime space, as well as the gradually strengthening confidence of occupiers contributed to a two per cent quarter-over-quarter local currency rental increase in Tokyo ($864 per sqft per annum), the seventh in the ranking.
Viewed as the gateway to Asia by many foreign retailers, competition for prime locations across Tokyo remained fierce. Domestic retailers have also expanded, with some Osaka-based retailers expanding their presence in the city for the first time.
“Consumer demand and confidence conditions have notably improved thanks to a strengthening economy,” said Junichi Taguchi, MD of CBRE’s retail services division in Japan.
“Luxury retailers noted a positive push in demand for brand items, which have been recording high sales values in department stores since the beginning of the year.”
Meanwhile, prime rents in Sydney ($945 per sqft), Melbourne ($794 per sqft) and Brisbane ($599 per sqft), held steady this quarter despite flat retail turnover figures.
“Australia has continued to benefit from low vacancy rates and the limited new supply coming to the market. The influx of international retailers has also continued with both Brooks Brothers from the US and Marks & Spencer from the UK recently announcing they would enter Australia,” said Josh Loudoun, senior director of retail services, Australia, CBRE.
“Another consideration is the upcoming Federal election. History shows that retail sales following a Federal election usually show a strong short-term spike a consumer confidence lifts and this will translate to rental growth over the next 12 months. This will also coincide with a number of the ‘boom time’ leases of 2008/2009 coming up for their five year anniversary.”
