Mapic: Top retail locations globally still attract rising rents

Retailers are focusing on some of the major global fashion capitals, pushing rents in the world’s most expensive retail locations even higher, according to CBRE.

Despite deteriorating economic conditions, the retail sector has to date continued to perform relatively well. Half of the markets surveyed saw retail rental growth in the past year (ending Q3 2008), with 65% of those seeing increases over the last six months.

New York’s 5th Avenue remains the world’s most expensive retail destination, with rental values reaching €16,817/sqm/annum, more than 75% higher than Hong Kong, the second most expensive location.

Also making the top five most expensive retail destinations globally are Moscow, London and Tokyo.

Demand is coming from retailers that are performing well in the current market – such as luxury brands – but also from retailers who are reining in wider expansion plans in response to weakening consumer spending and focusing on longer-term strategic locations as opposed to new destinations.

Although rents have risen in many key cities, the slowdown in consumer demand has inevitably struck some retail markets around the world resulting in falling rents.

In cities such as Tokyo and Madrid, where rents fell by 5% in the past six months, retailers are now beginning to take advantage of their covenant strength and landlords are becoming more open to rental negotiations.

Ray Torto, chief global economist at CBRE, said: ’It is easy to assume that falling consumer confidence and financial market turmoil across the globe are striking all retail stores, but the CBRE survey together with sale figures from retailers is showing that we have a barbell market. Our analysis indicates that the upper end is holding up well and the same is true for lower-end, non-discretionary retailers.’

EMEA continues to dominate the most expensive retail hot spots, containing 33 of the top 50 premier destinations. Cities in the EMEA region also dominate the fastest-growing retail rents.

Peter Gold, head of cross-border retail in the EMEA region for CBRE, said: ’Although growth rates are slowing in response to deteriorating economic conditions, demand for retail space at the prime end of the market, particularly in fashion hot spots like New York and London, continues to propel rental growth in many cities.

’Many retailers are opting for ‘prime pitch’ space in major retail cities in an attempt to secure the best long-term prospects for their business in an uncertain market.’

He added: ’Changing economic conditions are also impacting the types of retailers driving demand.

’Many private retailers still have cash to fuel their expansion plans; luxury and value-led brands have announced positive sales growth and are maintaining strategic expansion; and many retailers are jumping on opportunities to fill new gaps in the shifting marketplace.’