Virtually turbulence-proof: Top retail locations worldwide see continued rise in prime rents

1 Sep, 2011, Frankfurt

• Almost two thirds of countries surveyed see prime rent increase
• An unprecedented 109.5% hike in prime rents in Beijing
• Fifth Avenue still most expensive location worldwide
• Munich retains 10th position
• Zurich down one place to eighth
• Vienna a non-mover at twelfth

Budget deficits, spiralling debts, volatile market prices, predictions of economic slowdown – the bad news of the past year (June 2010 to July 2011) has had little impact on the world's top retail locations: in 81% of all the countries surveyed, retail rents in prime locations either increased or remained at an existing high level. Falling rents were recorded in only 19% of the countries (compared to 34% the previous year). These are the findings of Cushman & Wakefield (C&W) report " Main Streets Across The World", published today, which provides a detailed analysis of retail property rental performance in 278 retail locations in 63 countries worldwide.
This annual publication also features an overall ranking of the most expensive retail locations across the globe based on gross prime rents at the various retail locations.

Top locations stand their ground with little movement in the top ten

This year's survey once again found New York's Fifth Avenue to be the world's most expensive retail location with the monthly prime rent at this key retail location for international fashion houses showing a 21.6% increase to 1,392 EUR/m²/month. Second and third rankings also remained unchanged from last year with Hong Kong's Causeway Bay coming in second with a monthly prime rent of 1,202 EUR/m²/month, and Ginza in Tokyo a distant third, where a square meter of retail space costs up to 646 EUR/m²/month.

There were only a few changes among the top ten. The most notable movement was Pitt Street Mall in Sydney, which surged five places to become the fourth most expensive location in the world. The monthly prime rent in Australia's most cosmopolitan shopping precinct saw a 33.3% to 615 EUR/m²/month.

Although rents in London's most expensive shopping street, New Bond Street, saw a 4.3% increase (to 575 EUR/m²/month per month), it fell two places in the ranking behind Champs Elysées, Paris. With a monthly prime rent reaching 614 EUR/m²/month, this world-renowned boulevard has therefore become the most expensive retail location in Europe, retaining fifth place in the global rankings.

Kaufingerstrasse in Munich has made the top ten for the third year running, and in early autumn 2011 ranks tenth with a monthly prime rent of 330 Euro per square metre.

Strongest growth seen in Asia Pacific and Latin America

As in 2010, the Asia Pacific and Latin America regions saw the highest rises in retail rents. Asia Pacific saw a 12.2% increase overall with Wangfujing in Peking reporting the highest growth (109.5%), which was the highest rise in the world.
In South America, rents increased by 10.6% overall, with Garcia D’avilla Street in Rio de Janeiro recording the highest figure (+52.2%). The highest monthly rent for Latin America was in São Paulo at 329 EUR/m²/month. The general recovery in the retail sector and increasing rent levels are primarily attributable to rising employment, wage increases and improved financing opportunities, all of which has, in turn, boosted consumer spending.

Sideways movement in prime rents in Middle East and Africa – restrained growth in Europe

Whilst prime rents in the Middle East and Africa remained at the previous year's level, Europe experienced somewhat restrained growth (1.9%). Nevertheless, rents had bounced back from the decline of 4.2% recorded in 2009/2010.
The strongest growth in Europe was experienced by Helsinki city centre, which has seen a 33.3% increase in retail rents over the past twelve months.

Bahnhofstrasse in Zurich, Kaufingerstrasse in Munich and Kaerntnerstrasse in Vienna are again the most expensive shopping streets in the German-speaking countries

In September 2011, Kaufingerstrasse in Munich remains the most expensive shopping street in Germany. The continued rise in rents is being driven by sustained strong demand from international retailers in particular. Strong economic fundamentals coupled with stable consumer demand have also brought various international retail chains to other major German cities. At all of these cities except Zeil in Frankfurt, where monthly prime rents remained stable at 270 Euro per m², rents have in fact continued to rise, not least because of the increasingly limited space at Germany's prime locations. Rents in Tauentzienstrasse in Berlin, Schildergasse in Cologne and Koenigsstrasse in Stuttgart stood at 260 Euros. In September 2011, the gross monthly prime rents for Koenigsallee in Dusseldorf, Peterstrasse in Leipzig and Pragerstrasse in Dresden stood at 250 Euros, 130 Euros and 105 Euros per m² respectively.

As in previous years, Bahnhofstrasse in Zurich remained the most expensive retail location within all the German-speaking countries. The monthly prime rent here is 546 EUR/m²/month (up 8.8% on 2010). However, the Swiss shopping street dropped one place in the global ranking, falling from seventh to eighth.

In Austria, rents remained at the previous year's level: Demand for retail space was strong, particularly from international retail chains, which increased their presence following the various modernisation and expansion activities that had taken place to improve supply. With monthly rents of 275 Euro per m², Kaerntnerstrasse in Vienna is the third most expensive retail location among German-speaking countries, and retains twelfth position in the global ranking.

China, India and South America the key focus of expansion efforts - German prime locations remain popular with international retailers - Trend towards multi-channel retailing

This latest Cushman & Wakefield report clearly illustrates that retailers are continuing to expand into the Middle East and Japan, but that the key focus destinations for expansion are China, India and South America, and this will remain the case for the coming year.
"Our international retail teams have found that the significant revival of prime retail locations around the world is clearly being driven by the aggressive expansion strategies of international retailers, which are tending to focus on entering emerging markets rather than opening new shops in their own backyard. As a result, competition over space in prime locations is fierce. Retailers are vying for the most prominent locations in which to position their brand – and facing a limited supply of available space and increasing demand. Increases in rent prices are the logical consequence of this," explains Inga Schwarz, Head of Research at C&W Germany. "The growth in Germany is also linked to this. Whilst Germany had for a long time presented a difficult terrain for international retailers, they are now attracted by the growing diversity of the German retail landscape and the strong purchasing power of its consumers, the prevailing market stability and the sheer size of the market. It would appear that the recent leases taken out by Forever21 and Abercrombie&Fitch are just the beginning with more set to follow."

The C&W researchers all agree that there is a clear trend towards multi-channel retailing. Traditional marketing channels and physical stores are no longer the only means used for brand positioning. Instead, retailers are increasingly making use of the various opportunities offered by social media. "Retailers wanting to reach their customers nowadays no longer simply use the one website, but are instead making use of Facebook, Twitter, YouTube, blogging and even their own apps," explains Schwarz. "This is sure to have a knock-on effect on physical retail locations. While prime locations will continue to stay ahead of the game – what better way of presenting the brand than with a store which can appeal to all the senses – C locations, the shopping streets leading to the main shopping areas, are sure to feel the pressure. But this is still some way off."

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