Jul 11, 2012
11 July 2012, Shanghai – Majority of the world’s priciest fashion retail streets continue to show strong year-on-year (YoY) rental growth despite continued economic uncertainty, according to the latest Colliers International Retail Highlights Mid-Year 2012 covering total 129 prime retail locations. New York’s Fifth Avenue sustained its top spot as the world’s most expensive fashion retail streets, followed by Queen’s Road Central and Canton Road in Hong Kong.
Global Top Five Most Expensive Fashion Retail Streets
Retail Strips
Rents
(US$ / sq ft / year)
as of Mar 2012
Annual Change
(based on local currency)
New York – Fifth Avenue
$2,633
22.5%
Hong Kong – Queen’s Road Central
$1,831
34.7%
Hong Kong – Canton Road
$1,831
30.2%
London – Old Bond Street*
$1,601
11.1%
Paris – Avenue des Champs-Élysées
$1,239
flat
*Zone A rents
Out of the 129 prime locations surveyed, 51 posted higher year-over-year average rents while 49 were flat. Except the rent of Avenue des Champs-Élysées staying flat, the other four streets in the global top five list recorded double-digit YoY growth. According to the reports’ analysis, retailers entering new markets – both developed and developing – continue to hedge their risk by targeting the same one or two premier locations, generating heated competition and out-sizing rental growth.
Looking ahead, the current weakening consumer sentiment among affluent shoppers has already begun to impact retailers’ revenues and suggests flattening growth rates for the coming year. In Asia, following Hong Kong’s fashion retail streets in the global top five, Ginza-Chuo Street in Tokyo,
Orchard Road in Singapore and Nanjing Road West in Shanghai ranked 14th, 25th and 31st respectively worldwide. Retail rents of most Asian locations surveyed either saw growth or stayed flat, with the most resilient being Hong Kong, Beijing and Bangalore which registered double-digit increase. Survey findings of the key retail markets in Asia are as follows.
Mainland China
In Shanghai, average rents for ground-floor space in prime areas reached RMB52.7 per sq m per day, up 2.9% from 4Q 2011. Brands, seeking to expand their business into the second, third or fourth tier cities, continue to perceive Shanghai as an excellent test market. This strong interest from both domestic and international retailers will keep rents and occupancy at relatively high levels.
Beijing’s average ground-floor fixed rent rose by 3.97% quarter-on-quarter (QoQ). Given the increasing disposable income of local residents and the further globalisation of Beijing among its peers in China, the outlook for Beijing’s retail property market is expected to remain strong. Despite an estimated 312,000 sq m space to be added into Beijing’s retail stock by new developments, a high level of space pre-commitments in most shopping centres suggests that the impact of this increasing new supply will be limited.
In Guangzhou, average ground floor rents remained stable at RMB 757.7 per sq m per month. In 2012, 629,000 sq m new supply will be delivered and are expected to elevate the market’s vacancy rates.
Hong Kong
Despite increasingly challenging external environment, there is no sign of abating for the inflow of international fashion and luxury brands in 2012, which fuelled retail rental growth in Hong Kong. Hong Kong remains a landlord’s market where newcomers outbid one another and existing tenants succumb to soaring rental increases in order to secure the best locations in the traditional shopping districts including Central, Causeway Bay, Tsim Sha Tsui and Mongkok. For the whole year 2012, the average rent of ground-level shops in traditional shopping districts in Hong Kong is predicted to rise 12%.
Japan
Retail rents in prime retail corridors, which dropped steadily in 2010, stablised in 2011 and have begun to improve in 2012. In Tokyo, rents on Chuo Street in Ginza are projected to increase 10% through 2012. Casual fashion tenants are enjoying increasing popularity with consumers and have begun to compete far more aggressively for space in prime retail corridors.
Korea
Rents in Seoul’s Central District rose 2.5% YoY to approximately US$250 per sq ft per year. In the past several years, the concept of the ‘one-stop’ shopping destination in Korea has expanded from large urban markets (such as Seoul’s Dongdaemun and Namdaemun) into large-scale, Western-style complexes. For example, D’Cube City, opened in 3Q 2011 with a department store, a hotel, and office space, and more projects are coming. Also, fast fashion global brands are leading the retail expansion in Korea’s market.
Singapore
Orchard Road, the premier retail venue of Singapore, saw its prime ground floor gross rents holding steady around SGD$38.5 per sq ft per month for two years before slipping to SGD$38.30 per sq ft per month in 4Q 2011 due to the latent effects of the influx of space completed in 2009/2010. Over the period between 2Q and end of 2012, approximately 200,000 sq ft of new retail space will be delivered. Looking ahead, retail rents are forecast to stay fairly resilient, with any downward corrections keeping within 3%. Given the immediate shopper catchment and the continued trend of retailers seeking a presence in well-positioned suburban malls in regional centers, rents there are projected to hold up better than those on Orchard Road.
India
According to the survey findings, retail rents of Bangalore’s popular Brigade Road rose 18% YoY amidst extremely low vacancy rates; while that of Khan Market in Delhi was up slightly 4.8%. Retail development is taking place not just in the major cities but also second- and third-tier cities. Besides Mumbai and Delhi, 43 other cities have populations greater than one million. Meanwhile, the popularity of online retailing has surged with consumer incentives and product discounts; however, there are some limitations as India’s challenged infrastructure hinders efficient transport and delivery of merchandise.
About Colliers International
Colliers International is a global leader in real estate services with more than 12,300 professionals operating out of 522 offices in 62 countries. As a subsidiary of FirstService Corporation (NASDAQ: FSRV; TSX: FSV and FSV.PR.U), Colliers offers the stability of a strong financial partner and significant local ownership providing clients with accountability and enterprising real estate solutions. Colliers provides a full range of services to real estate users, owners and investors worldwide including: global corporate solutions; sale and lease brokerage; property and asset management; project management; hotel investment sales and consulting; property valuation and appraisal services; mortgage banking and insightful research. The Lipsey Company and National Real Estate Investor magazine ranked Colliers International as the world’s number two commercial real estate brand.
At the International Property Awards – Asia Pacific 2012, Colliers is awarded 11 accolades across the region including the Best Property Consultancy Awards in Hong Kong and Indonesia, and regional awards of Best Property Consultancy Marketing and Best Real Estate Agency Website for Asia Pacific.
