- Causeway Bay in Hong Kong most expensive retail location.
- New York's Fifth Avenue no longer on top spot for first time in 11 years.
- Strong rent increases on the Avenue des Champs-Élysées allow Parisian boulevard to climb to 3rd place.
- Zurich climbs from eighth to seventh place.
- Munich unchanged at 10th place in the world.
- Vienna in 12th place in previous year, now at 11th.
In spite of a slowing global economy and ongoing uncertainties in the markets – something which applies especially to growth in the Eurozone – the retail markets proved themselves robust worldwide between June 2011 and June 2012. On average, premium rents rose by 4.5% during this period. These general rent increases were carried in particular by strong growth in Asia and America. Whilst rent increases were recorded for 147 locations, rents fell on the previous year in just 49 locations (or 15% of all places) – falls in rent were recorded in 2011 for 19% of all places surveyed.
These figures are published today by Cushman & Wakefield (C&W) in its latest report "Main Streets Across the World". 326 retail locations were surveyed in 62 countries for the study, which appears annually. The publication contains a total ranking of the most expensive retail locations around the world and highlights growth in the retail markets in these countries and regions. Gross premium rents of the most expensive retail locations in a particular country form the basis of the list of rankings.
Hong Kong's Causeway Bay assumes top spot – top ten locations see change
According to the latest C&W study, New York's Fifth Avenue has surrendered its position as the most expensive retail location in the world for the first time after 11 years. Although premium rents on Fifth Avenue increased by 11.1% during the period surveyed to 1,767 euros per sqm per month, a climb of 34.9% on Causeway Bay, Hong Kong's top shopping destination, catapulted it to top spot of the global rankings. Premium rents of 1,859 euros per sqm per month are currently being demanded on Causeway Bay. There was also movement between third and fifth place: with a rent increase of 30% to 798 euros per sqm per month, Paris' Avenue des Champs-Élysées relegated Tokyo's Ginza to fourth spot (747 euros per sqm per month). As in Tokyo's Ginza, the peak rents in Sydney's Pitt Street Mall saw little change on the previous year, which ultimately allowed Australia's top destination to drop from fourth to fifth place. Staying in their places were London's New Bond Street (6th), Seoul's Myeongdong (9th) and Munich's Kaufingerstraße (10th). Swapping places were Zurich's Bahnhofstraße – currently in 7th – and Milan's Via Montenapoleone (8th)
Luxury brands biggest driver of premium rents worldwide
Growth in premium rents in the most important shopping locations in the world is primarily driven by luxury brands. Competition amongst the brands and/or retailers for the most sought-after addresses in the world is applying an upward pressure on peak rents. Although the increase in retail turnover has recently slowed, luxury brands currently appear to be crisis-resistant. Accordingly, they may also play a crucial role in growth in premium rental prices over the coming months, as Marc Alfken, head of retail leasing at C&W in Germany emphasises: "We believe that the drivers behind the positive growth in premium rents won't change substantially over the coming months. We add to this the rising demand for floor space in the top locations, the progression of globalization and the ongoing expansion of luxury brands."
Inga Schwarz, responsible for research at C&W in Germany, adds: "As part of this process, the regional focus of luxury brands may also lie in the Asia-Pacific region and South America in the future. Maturing and growing retail markets combined with a modern supply of floor space are now attractive forces that no luxury brands can afford to resist. Additional dynamics could also influence the markets if new political directives for supporting retail business in countries such as India and China were to be adopted.
Strongest growth American
The highest increase in retail rents was recorded on the American continent. Here, the rise in premium rents in North America was primarily driven by locations in the USA (16.3%) and Mexico (11.5%), whilst in the top Canadian locations top rents climbed only marginally. An increase in rental prices was also above average in South America with 11.6% on the period for the previous year. The engine of growth was, once more, Brazil: a rise of 64.7% was registered for the top address in Rio de Janeiro, the area around Garcia D'Avila in Ipanema.
Rent increases slowing in Asia-Pacific
Increases in premium rents in the Asia-Pacific region have indeed slowed down over the past year from 12.2% to 8.6%. Nevertheless, demand for the top spaces continues to be decidedly high and also robust. If nothing else, it has become necessary for retailers to attract the young but increasingly well-to-do middle-classes in these regions. A clear sign of the strength and attraction of the region is the number of top placings on the global ranking: there are four locations from the Asia-Pacific region amongst the top ten.
Uneven rental growth in Europe
Retail locations in Europe have been growing very unevenly over the past year. Whilst premium locations in most of the cities recorded buoyant demand for rental space from the top international brands, the so-called 'B locations' are having to combat vacancies and weak retail turnover, even in booming towns.
In the EMEA region (Europe, Middle East and Africa), premium rents rose during the period under observation by 1.7%, driven by the continuously high retail space demand from international fashion and luxury brands. Premium rents either increased or at least remained stable in 25 of 31 European locations studied. This was a different situation in European countries currently hit by tough austerity measures resulting from the sovereign debt crises: in most countries the premium rent sank. This was especially the case for Greece (-17.1%), Ireland (-15.1%) and Hungary (-13.3%). Falling premium rents were also recorded for Bulgaria (-7.7%), but this was due to an increase in the supply of retail space.
Europe's top locations have been through a dynamic year. For example, premium rents in France went up by 14.6%, in the United Kingdom by 6.3%, in Italy by 5.4%, in Germany by 4.7%, in the Netherlands by 4.5% and in Spain by 2%. The most expensive retail location in Europe was once again the Parisian Avenue des Champs-Élysées. A rental price increase of 30% to 798 euros per sqm per month widened the gap once more on the second placed New Bond Street in London (3.1%) at 662 euros per sqm per month.
Bahnhofstrasse in Zurich, Kaufingerstrasse in Munich and the Kohlmarkt in Vienna the most expensive shopping streets in German-speaking countries
Kaufingerstraße in Munich continues to be Germany's most expensive shopping street. Just as in previous years, demand from international retailers in the Bavarian capital is unwaveringly high. Yet international retailers and luxury brands haven't just got their eyes on the premium location of Munich: other German cities have also been the point of their focus. "Germany's strong economic fundamentals, the positive growth in retail turnover and, last but not least, the tremendous attraction of German inner cities are pulling in top retailers to our prime locations," explains Marc Alfken. "This growth looks set to continue over the coming months. The interest in high-quality retail space is unwavering."
Premium rents rose in seven of the nine German inner city locations surveyed during the period under observation. Furthermore, the top rents in Stuttgart's Königsstraße and in Leipzig's Petersstraße remained stable.
Whilst Munich sits unchallenged in first place on the domestic German rankings with a top rental price of 350 euros per sqm per month, Frankfurt's Zeil and Hamburg's Spitaler Straße follow in the subsequent spots with 290 euros per sqm per month each. 280 euros per sqm per month was asked for in June in Berlin's Tauentzienstraße and Cologne's Schildergasse. The premium rents in Düsseldorf's Königsallee and Stuttgart's Königsstraße were at 260 euros per sqm per month. Following at some distance are Leipzig's Petersstraße (130 euros per sqm per month) and Dresden's Pragerstraße (115 euros per sqm per month).
As in previous years, Bahnhofstrasse in Zurich remained the most expensive retail location within all the German-speaking countries. The peak rent here was 604 euros per sqm per month in June (up 8.7 % on 2011). The Swiss shopping street was therefore able to climb a place on the global rankings table and now occupies 7th spot, ahead of Milan's Via Montenapoleone, which it pushed back into eighth. In contrast, Basel's Freie Straße (201 euros per sqm per month) and Bern's Marktgasse / Spitalgasse (208 euros per sqm per month) proved to be stable.
In Austria, rents in the premium locations have been growing stably if not especially dramatically, too. The most expensive location was, for the first time, Vienna's Kohlmarkt, which achieved top rents of 340 euros per sqm per month. It thus occupies 11th place in a list of the world's most expensive locations and registered the highest increase in rent in Austria with 6.3%. Following on down the rankings of the most expensive shopping addresses in Austria are Vienna's Graben and Kärntenstraße with 275 euros per sqm per month, Vienna's Mariahilferstraße with 135 euros per sqm per month, Salzburg's Getreidegasse with 120 euros per sqm per month and Landstraße in Linz with 115 euros per sqm per month. At the tail end is Herrengasse in Graz with a monthly rent of 105 euros per sqm.