Magazines Archives - 2009 January

Demand for prime space spikes global retail rent
Story 9 - Properties Update

DESPITE the economic downturn, more retailers are opening their stores in prime locations, pushing retail rents higher as demand for space outweighs
supply, noted US-based global realestate group CB Richard Ellis Group Inc (CBRE).

In its latest Global Retail Rents Survey, CBRE pointed out that about 50% of the markets surveyed had enjoyed rental growth in the third quarter of 2008, and nearly 65% over the last two quarters combined.

Said Ray Torto, CBRE’s chief global economist: “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 sales figures from retailers, [shows] 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.”

Even with slowing growth rates, “demand for retail space at the prime end, particularly in fashion hot spots like New York and London, continues to propel rental growth in many cities”, noted Peter Gold, CBRE’s head of crossborder retail, EMEA (Europe, Middle East and Africa).

“Many retailers are opting for ‘prime pitch’ space in major retail cities ... to secure the best long-term prospects ... in an uncertain market,” Gold added. Topping the global list is New York’s 5th Avenue, with a retail-rental value of US$2,200psf per year, nearly double second-place contender Hong Kong’s, while Moscow ranks third and London fourth, leaving Tokyo in fifth place and Paris, sixth. Some of the most expensive retail hot spots, the study discovered, are in EMEA, with 33 locations out of
the 50 ranked located in that region.

Gold also sees the changing economic conditions “impacting the types of retailers driving demand”, as many private operators “still have cash to fuel their expansion plans”. “Luxury and value-led brands have announced sales growth and are maintaining strategic expansion, and many retailers are jumping on opportunities to fill new gaps in the shifting marketplace,” he said. “Therefore, retailers with a particular point of differentiation — [be it] product- or price-based — within their markets are likely to succeed despite the tougher conditions,” Gold added, averring that they “will consequently grow market share and ultimately help to sustain rents in key cities”.

Among the fastest-growing destinations for retail rents in the Asia- Pacific are Guangzhou, Shanghai, Hong Kong and Singapore, which have also climbed in ranking to figure among the most expensive globally over the past six months. Hong Kong leads with an annual rate of US$1,236psf, followed
by Tokyo which has dipped to fifth place from the first quarter of 2008.

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