Despite Global Economic Slowdown, World’s Prime Shopping Streets See Rental Rise

Despite a slowing world economy, many of the world’s signature shopping thoroughfares are seeing retail rents rising, or at least remaining stable, according to Cushman & Wakefield’s 23rd annual “Main Streets Across the World” report, which measures the strength and popularity of major shopping streets in 48 countries. According to the report, retail rental rates rose, or remained stable, in 94 percent of 236 streets monitored. The report covered the time period from mid-2007 to mid-2008. New York’s Fifth Avenue is the world’s most expensive shopping street, where retailers can now expect to pay rents of $1,850 per square foot per annum, an increase of 23 percent over 2007. Gene Spiegelman, executive director of Cushman & Wakefield New York, said that Fifth Avenue saw some notable lease transactions during this period, such as the 30,000 square foot lease for Abercrombie & Fitch at 666 Fifth Avenue, which broke the $2,3000 per square foot per annum barrier, and a 21,000 square foot lease at 681 Fifth Avenue for Tommy Hilfiger. While leasing activity was strong, many retailers along Fifth Avenue also saw strong sales volume, fueled by a large influx of international visitors to New York who spent freely due to their strong currencies, such as the Euro, Spiegelman said. Rounding out the world’s top five high rent shopping streets after Fifth Avenue are: Causeway Bay in Hong Kong ($1,784 psf); Avenue des Champs Elysee in Paris ($1,134 psf); Via Montenapoleone in Milan ($983 psf); and Grafton Street in Dublin ($824 psf). London’s Bond Street and Tokyo’s Ginza dropped out of the top five, to six and seven, respectively. The report found that high-end international retailers are continuing to expand into new overseas markets, and are generally taking a long-term view looking ahead of the current economic cycle. And while global retailers may cut back on their print advertising budgets, for example, they will continue to look for what Spiegelman called “branding plays,” to locate their stores on the world’s signature shopping venues, to get their name seen by as many shoppers as possible. These international brand names are increasingly focused on expanding into Turkey and Russia in Europe, Argentina and Brazil in the Americas, and India in Asia. In India, Mumbai’s Colaba Causeway showed the strongest growth, with rents rising over 182 percent to $269 per square foot. Six out of the top ten retail streets in Asia with the strongest retail rent growth were in India. In Europe, rents on Turkey’s main streets have all shown big rental rate increases, with five of the 10 strongest growth locations being in either Istanbul or Ankara. Rents on the European side of the Valikonagi Caddesi have increased 114 percent over the year, with rents on the Asian side of Bagdat Caddesi increasing 96 percent. Turkey’s most expensive street, the European side of Abdi Ipekci, rose from 32nd most expensive in 2007 to tie for 24th in this year’s ranking. Spiegelman said that many luxury retailers will “feel pain” this year, but many will still look to lease space on the world’s great shopping avenues. “They are looking for long-term opportunities, and they will act upon these opportunities,” he said.