New York has topped the list for the priciest retail rents in the world, followed by Sydney and Hong Kong, according to a recent CB Richard Ellis Group Inc. (CBRE) Global MarketView report on the retail real estate sector.
The Los Angeles-based multinational real estate corporation announced that store rentals in some of the world’s most exclusive shopping locations have risen in the first quarter. This news provides a sign of recovery from the global financial crisis—a sigh of relief for the international retail market.
According to the International Monetary Fund, the global economy is expected to grow 4.2 percent in 2010. This could give confidence to retailers to expand and also provide some certainty to international brands attempting new ventures. Although actual retail sales figures have not been particularly encouraging, consumers are still wary, according to the report from the world’s largest real estate services firm.
New York City has triumphed as the world's most costly retail destination, with prime rents at $1,725 per square foot per year. Sydney remains in second place globally ($1,155 per sq. ft.), with Hong Kong ranked third ($974 per sq. ft.). London follows in fourth place, with an annual increase of 20 percent since the first quarter of 2009 and Paris makes the top five with rents of $791 per square foot.
"Retailers still face uncertain trading conditions and continue to put pressure on landlords to offer incentive packages. However, market pressures have not stopped retailers from expanding and demand for prime retail space remains strong in many markets across the world. This, combined with low vacancy rates, has created supply-demand imbalances in some markets," said Raymond Torto, CBRE's global chief economist in a statement. "However, the rental disparity between prime and secondary locations is generally increasing. Whilst prime space is doing well, secondary units are typically seeing higher vacancy, lower retailer demand and falling rents."
Fifth Avenue, for example, has only two spaces available between 49th Street and 59th Street—one at 55th Street, and a 2,000 square-foot space next to Uniqlo’s new flagship at 666 Fifth Ave., according to a Bloomberg interview with Faith Hope Consolo, who leads the retail property group for Manhattan-based Prudential Douglas Elliman Real Estate.
Uniqlo owner Fast Retailing Co., Japan’s biggest apparel retailer, agreed last month to pay a record $300 million over 15 years for the leased space.
"Demand for the best retail locations in North American markets like New York, Los Angeles, and Chicago remains healthy and some of the fastest growing retail rents have been seen in Latin America, markets including Rio de Janeiro, Mexico City, and Santiago," said Anthony Buono, executive managing director of CBRE Retail Services in the Americas.
U.S. cities are considered to have the priciest rents in the Americas region. Los Angeles and Chicago rank at 12th and 14th, respectively.
