by Shane Henson — June 12, 2013—New research reports from global commercial real estate services and investment firm CBRE Group Inc. conclude that Hong Kong not only continues to rank as the world’s most expensive global retail market, but also as the world’s hottest retail market.
CBRE’s quarterly survey, Global Retail View (Q1 2013), which tracks the top 10 most expensive prime global retail markets, reveals that strong demand from international retailers, coupled with a modest supply pipeline, has led to record-high prime rental rates. Despite subdued retail sales growth and strained consumer sentiments, international retailers reportedly remain focused on long-term growth strategies that have resulted in store expansions across many key global markets such as New York, London and Moscow.
Leading the pack, Hong Kong continues to rank as the world’s most expensive global retail market, recording prime rental rates during Q1 2013 of $4,328 per square foot per annum. The city continues to rank in a rental class distinctly above its global peers, recording prime rents nearly 150 percent higher than New York City and more than 400 percent higher than London and Paris.
Ranking as the second most expensive global retail market, New York City ($2,970 per sq. ft.) welcomed several new national and global retailers in 2012 that were attracted by the market’s strong international tourism features. The pipeline for new retail space in New York City is reportedly low; however, a significant amount of prime space is said to be available along Fifth Avenue between 49th and 59th Street.
As for other cities high on the list, Europe’s prime retail markets of London ($1,053 per sq. ft.) and Paris ($1,050 per sq. ft.) are holding steady, largely due to scarcity of supply and correspondingly high rent levels. The tight supply of prime space throughout the Asia Pacific region helped maintain rent levels in Sydney ($1,018 per sq. ft.), Melbourne, Beijing and Tokyo. Pacific markets gained prominence in the global retail rankings with Brisbane ($739 per sq. ft.) and Melbourne ($851 per sq. ft.) now ranking among the most expensive prime retail markets.
A related report from CBRE, How Global is the Business of Retail, finds that Hong Kong is also the world’s hottest retail market, attracting significantly more new entrants than any other city. CBRE’s sixth annual survey found that Hong Kong was by far the most sought-after city, with 51 new retailer entries from all sectors, not just high-end fashion brands. The new entrants were principally from Europe, but also from the United States, Japan and Korea.
“Hong Kong provides an opportunity for retailers to capitalize on the emerging middle class population and tourists from mainland China. Hong Kong is often used as a launch pad for brands entering the region, although less so than previously, as more retailers enter Chinese cities directly,” says Peter Gold, head of cross border EMEA retail for CBRE. “While luxury brands led the way in 2012, retailers from across the spectrum opened their first store in the city last year, including Pierre Cardin, Forever 21 and Cos.”
According to the CBRE survey, mature markets dominated retailers’ expansion plans last year, although six emerging markets made the top 20. Kiev was in second place after Hong Kong with 39 new entrants, with Sao Paulo (25 new entrants), Iasi (19), Muscat (17) and Ho Chi Minh City (15) also important targets.
