Economic Climate Promises to Wear Down High-Street Retail’s Strength

Retail property sales worldwide experienced a year-over-year skid through June of 54 percent, but deals involving high-street assets–including single shops, department stores and urban malls in central business districts–were a silver lining, according to Real Capital Analytics Inc.’s latest global capital trends report, “Investment Market Erosion Spreads and Intensifies.” Sales of those properties took a plunge, but the decline clocked in at 25 percent, still markedly better than the sector’s aggregate percentage drop, for a total of $15 billion in high-street sales. Comparing June 2008 to the same period one year ago, Tokyo realized the highest average price per square foot–$2,849. Tokyo’s closest competitor, New York City, was a ways off, with $1,506 per square foot, trailed by London at $1,471 per square foot. London, however, pulled in the heftiest sales volume of high-street retail properties with $3.4 billion, followed by Hong Kong with $3.2 billion and Tokyo and the New York City metro area, each netting $28 billion in high-street retail sales. Interestingly enough, though, average cap rates among cities with the strongest sales volume and square-footage price tags were just 30 basis points apart, but cap rates and pricing for CBD office experienced bigger discrepancies, according to the report. It’s not smooth sailing just yet, though. “The global economic downturn, combined with the growth of U.S.-style malls, will erode high street strength, especially on celebrated shopping streets such as Old Bond Street, Fifth Avenue or the Ginza,” the report said