US$3,500/sq.ft/yr in Upper 5th - nearly 50 per cent more expensive than second place Causeway Bay, Hong Kong
Report shows that rents have risen in 35% of streets around the world
New York’s Upper 5th Avenue is the most expensive retail street in the world with rents rising to US$3,500/sq.ft/yr in 2015 – nearly 50 per cent more expensive than second place Causeway Bay in Hong Kong, according to a global research report out today from Cushman & Wakefield.
The ‘Main Streets Across the World’ report tracks over 500 of the top retail streets around the globe, ranking them by their prime rental value utilising Cushman & Wakefield’s proprietary data. The 27th edition of the report shows that rents have risen in 35% of streets around the world - despite the increased global uncertainty experienced over the past 12 months. The report also includes a ranking of the 65 most expensive streets – the top one per country.
Once again, New York’s 5th Avenue retained its position as the most expensive global retail location. By the second quarter of 2015, rents reached US$3,500/sq.ft/yr an increase of 3.6% year-on year and 46% above the second-placed Causeway Bay in Hong Kong (US$2,399/sq.ft/yr). The top full 10 table is above.
Avenue Champs Élysées in Paris retained its crown as the most expensive retail location in EMEA, followed closely by London’s New Bond Street. Strongest rental growth this year was recorded in Dublin’s Grafton Street and Covent Garden in London, as well as in top high streets in Milan and Rome. However, high streets in Russia and Ukraine experienced sharp falls linked to the conflict between the two countries that yielded slowdowns in economic growth and retail sales.
Justin Taylor, Head of EMEA Retail at Cushman & Wakefield, said: “Improving employment prospects, rising real wages and healthier consumer confidence in advanced economies are set to offer more positive momentum for the retail sector.
“From an EMEA perspective, despite any economic and political uncertainties in certain countries, the retail market is expected to see further improvements. Indeed, a strong retail sales growth forecast, robust occupier demand and a lack of supply in many locations mean rents will keep rising in the most popular high streets. Tight availability is shaping the retail landscape, pushing the geographic boundaries of well-established high street markets outwards.”
In Asia Pacific, there has been a downward pressure on rents on the back of weaker retail sales and slowing in tourist numbers in China particularly. This has resulted in lower rents, which is creating incentives for more international luxury brands and high street retailers to move in; however, interest rate hikes by the Chinese Government could impact consumer spending power. Elsewhere, high-profile international retailers are targeting both Australia and New Zealand, as well as Metro Manila.
Theodore Knipfing, Head of Retail, Asia Pacific at Cushman & Wakefield, said: “The outlook for Asia’s overall retail market is largely positive, with retail sales growth averaging 8.5% over the next five years (in U.S. dollar terms). Rising tourist numbers are spurring robust and sustained retailer demand – albeit firmly focused on prime, well-located space. Although the growth of e-commerce is notable across the region, physical stores will remain important although landlords will need to focus on improving the shopping environment and customer experience in order to compete for retailer demand.”
In the Americas, strong footfall in Manhattan has helped keep New York’s position elevated, with overseas tourists attracted to the vibrant retail environment and luxury retailers still dominating the high street – with no slowdown in sight. At a regional level, the USA alone represents 7 of the top 10 most expensive cities in the Americas, with Toronto and Vancouver standing at 6th and 8th position, respectively, and Buenos Aires – the most expensive Latin American location – at 13th.
The gateway cities of Chicago and San Francisco have witnessed healthy growth rates and are expected to continue to expand, bolstered by solid international retailer demand. With the continued success along Michigan Avenue and some other core high streets in Chicago, flagship retail stores are expected to grow outside these traditional prime pitches and expand the established core market. In San Francisco, a combination of a bustling tourism market – the city is one of the top international destinations – and an improving local economy has led to strong luxury retail space demand. As a result, vacancy rates at Union Square have eased to a record low of 1.1%. This helped to support rental growth of 13% over the 12 months to June 2015, following last year’s 21% growth.
Gene Spiegelman, Vice Chairman, Head of Retail Services, North America at Cushman & Wakefield, said: “The Americas region is expected to sustain a positive trajectory going forward into 2016, bolstered by a steady consumer sector benefiting from a material reduction in energy costs and stable employment expectations, especially in the U.S. Retailers will continue to add physical stores to support their expansion plans while at the same time optimising their footprint to respond to the ongoing evolution of ‘clicks and bricks’. International luxury brands will continue to dominate the high street, providing a boost to the key destination cities with high exposure from tourism and strong footfall.”
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