Sydney’s Pitt St Mall has topped the charts when it comes to the most expensive retail rents in Australia, according to global real estate adviser Cushman & Wakefield’s flagship retail research report, Main Streets Across the World. But New York’s Upper Fifth Avenue has overtaken Hong Kong’s Causeway Bay as the world’s most expensive shopping destination. Prime retail rents across the globe rose by an average of 2.4 per cent in the 12 months to September 2014, with recovery
sustained, but at an overall slower rate.
Volatile and somewhat subdued economic activity affected some markets, while structural changes impacting on others.
Despite a more constrained rental growth rate, 277 of the 330 locations surveyed were either static or increased over the year.
The ranking of the most expensive retail locations in each country recorded notable movements this year.
Rents in New York’s Upper Fifth Ave hit a record $3500 per sqft a year as it leapfrogged Causeway Bay, Hong Kong, which saw rents fall by 6.8 per cent, to secure top spot.
“New York is once again the most expensive shopping destination in the world and for the first time since 2011,” said Cushman & Wakefield’s global head of retail, John Strachan.
“Upper Fifth Ave also set a new record for the highest retail rents ever recorded. Global gateway markets continue to surge ahead as major brands battle for premier addresses in the top cities,” said Strachan.
Despite seeing no change to rental values after a 40 per cent rise last year, Champs-Élysées in Paris retained its third place, followed by London’s New Bond St in fourth, where rents rose by 4.2 per cent.
Pitt St Mall in Sydney completed the top five, with the location surging three places as it recorded an increase of 25 per cent on the back of a several international retailers taking up large units in the last six months.
USA reigns
The Americas yet again led the way as prime rental values surged ahead by 5.8 per cent, an identical rate to that recorded in 2012/2013.
The US and Mexico were the main catalysts behind this expansion, while Brazil acted as a drag on growth.
Matt Winn, Cushman & Wakefield’s global retail COO and head of retail in the Americas, said Positive economic news, combined with healthy retailer fundamentals, continued to filter through into the US retail market.
“Prime rents over the year to September were up an impressive 10.6 per cent on the same period last year,” said Winn.
“Indeed, strong retailer demand and robust tourist numbers continued to support expansions across the country, with gateway cities such a Los Angeles, San Francisco and New York in particular witnessing double digit growth.
“The arrival of brands such as Microsoft, which recently announced its first flagship store in New York’s Upper Fifth Ave, further underlined the importance of these premier shopping destinations.”
A slower expansion was also evident in Asia Pacific at 3.6 per cent, where the traditionally buoyant Hong Kong market was adversely affected by a decline in retail spending and lower tourism growth.
James Hawkey, head of retail Asia Pacific at Cushman & Wakefield, said that In 2014, retailers showed caution expanding in Hong Kong in the face of moderating sales performance and less exuberant consumption from mainland visitors.
“Luxury brands were conservative, while watch and jewellery retailers notably cut back on new stores, with this sector seeing negative growth. Several leading local retailers recorded lower holiday sales,” said Hawkey.
“The beginning of the ‘Occupy Central’ protest in Hong Kong since the end of September has further weakened the retail sentiment in major core retail areas, especially in Causeway Bay and Mong Kok, where students are still blocking some major roads.”
Europe, Middle East, and Africa
Conditions in the EMEA region were generally firmer and improved, evidenced by a stabilisation in markets previously witnessing marked declines in rents.
EMEA growth of 1.3 per cent was held back by significant falls in the Middle East. Prime rental growth in Europe of 2.3 per cent was not too dissimilar to 2012/2013.
Justin Taylor, head of EMEA retail at Cushman & Wakefield, said Europe’s gateway cities continue to thrive, while emerging markets are also seeing greater demand.
“Countries such as Portugal, Ireland, Spain, and Greece, which in previous surveys witnessed sharp falls, recorded good to strong growth in the 12 months to September,” said Taylor.
“Mature core markets such as the UK, France, and Germany continued to see good leasing activity, particularly in the prime segment.
“Exceptional luxury retailer demand in cities such as Paris and London, coupled with the very finite supply on offer, continued to exert upward pressure on rents in the best locations, but with large premiums also paid by new tenants to secure their preferred space.
“Turkey is also back in the spotlight, with strong growth fuelled by healthy consumer spending, an expanding middle class, better quality retail space and the arrival of more international retailers,” Taylor said.
Martin Mahmuti, a senior investment analyst at Cushman & Wakefield, concluded that the major retail brands will continue to experiment with design, layout, content, and services, as they reinvent the concept of their flagship stores.
“Despite the still uncertain economic situation in some parts of the world, notably in Asia Pacific and the Eurozone, retail market activity is expected to improve in the year ahead, Mahmuti said.
“Premier shopping locations will remain in high demand as retailers are keen to establish a presence and raise their brand profile, but supply as ever will remain tight.
“The growth of online shopping, supporting the polarisation in the market in favour of the biggest and the best, will increasingly drive retailer expansion strategies whilst also having a structural impact on local markets,” he said.