Hong Kong Still the Priciest Retail Market

Hong Kong remains the worlds most expensive city for global retailers, outpacing New York, Paris and London.

LOS ANGELES-Hong Kong remains the worlds most expensive city for global retailers, outpacing places like New York, Paris and London, where prime rents also continue to reach record-breaking levels, according to new research from global property advisor CBRE Group, Inc.

CBREs quarterly ranking of 97 prime retail locations/markets across the globe shows that competition in the worlds leading cities is getting even stronger. This demand is being fueled by high-end retailers willing to pay record rents for the most coveted shops, while development levels are at historic lows resulting in a shortage of prime retail space.

Hong Kong (US $4,334 per sq. ft. per annum) is the worlds most expensive location for prime retail rents by a substantial margin, followed by New York (US $3,300 per sq. ft. per annum), Paris (US $1,452 per sq. ft. per annum) and London (US $1,356 per sq. ft. per annum).

There has been a lot of discussion about the strength of luxury retailers versus those that serve the mid-market, says Raymond Toto, global chair of of Research, CBRE. CBREs research provides further evidence that prime retail rents are strong in most markets and rose further in key global markets like New York, London and Tokyo.

In many locations, prime retail rents have been buoyed by a shortage of available space in prime market areas and fervent demand from luxury brands. This lack of prime space has pushed some retailers toward secondary assets and markets. With construction levels at or near their troughs in many locations, this trend will likely continue in 2014.

Retailer demand in Hong Kong is focused on prime locations rather than secondary streets. The most sought-after prime streets are Russell Street inCauseway Bay, Canton Road in Tsim Sha Tsui, and Queens Road Central in Central. These locations which all recorded very tight vacancy continue to attract both global and local retailers.

New Yorks Fifth Avenue continued its ascent into record territory during Q4 2013, with the luxury thoroughfares average asking rent rising 4.8% quarter-over-quarter to an all-time high of US $3,300 per sq. ft. per annum. For a 5,000-sq.-ft. space, that would translate to US $16.5 million per year in rent. Other prime luxury streets in the northeast US also saw strong growth, including Newbury Street in Boston (up 6.7% quarter-over-quarter) and Walnut Street in Philadelphia (up 5.8% quarter-over-quarter) reporting the largest increases.

The retail market in France was characterized by heavy polarization, with substantial demand focused on prime space, especially in and around Paris. Significant interest from international retailers for the limited amount of available prime locations in Paris has resulted in steady rent growth over the past two years, with Paris average prime asking rent up 80% since Q1 2012. Sustained demand from international retailers will continue to support high street rents in 2014.

Strong demand for prime retail locations in London has pushed rents to record levels. The luxury sector is a huge driver of exponential rental and key money growth. The limited availability of space compared to demand for prime streets has led to increased demand for space in secondary locations in central London. However, the U.K. market is heavily polarized with poorer secondary shopping centers and high streets suffering increasing levels of vacant space and falling rents.

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Hong Kong Still the Priciest Retail Market