World’s Highest Retail Rents in 2019
- Nov 19, 2019
Cushman & Wakefield took another look at the major retail corridors of the world in its 31st edition of the “Main Streets Across the World” report, with Hong Kong scoring once again the highest rents. The annual report, however, does reflect the recent turmoil that has caused Hong Kong rents to plummet.
Looking at 448 high street retail rents this year, Hong Kong and its Causeway Bay retail location notched another year in first place after dethroning New York City in 2018. At the top, Causeway Bay had the highest rents at $2,745 per square foot during the second quarter of 2019. New York City’s upper Fifth Avenue corridor, between 49th and 60th Streets, followed closely with rents of $2,250 per square foot.
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There was little change at the top as London’s New Bond Street remained in third place with rents of $1,714 per square foot. Paris’ Avenue des Champs Élysées also didn’t move in its ranking of fourth place with rents of $1,478 per square foot, leaving Milan’s Via Montenapoleone in fifth place again with rents at $1,447 per square foot.
According to Cushman & Wakefield, some of the more affordable retail locations in the world’s top markets include Abu Dhabi ($18 per square foot), Canada’s Calgary market ($29 per square foot) and Hyderabad’s Raj Bhavan Road in India ($16 per square foot).
But Hong Kong isn’t expected to stay at the top, according to James Shepherd, Cushman & Wakefield’s head of research for the Asia Pacific region. He explained that Hong Kong’s retail market is feeling the pressure from recent challenges, leading to a sharp drop in tourist arrivals and retail sales. Shepherd added that some data has come out showing rents falling across all submarkets and that retailers are taking a cautious stance. In the meantime, New York’s rents seem to have stabilized, Shepherd added.
Online Retail Optimization
While many of the rent numbers deal solely with the physical attributes of retail, Cushman & Wakefield’s Darren Yates, who is the head of the retail research and insight division for Europe, the Middle East and Asia, said the online market has certainly stirred things up for the retail sector.
Retail e-commerce sales have continued to expand since 2014 and Yates added they may grow 20 to 30 percent in some markets. With this rapid rise in online sales, Yates said that retail stores have begun to adapt their mission. Some digital companies like Amazon, bedding company Tuft & Needle and eyewear company Warby Parkers have opened brick-and-mortar stores. So while there’s still a need for physical space, the nature of it has changed, catering more towards flexible short-term leases and tenants that are more aligned with entertainment, leisure, or food and beverage, Yates said.
Ultimately, retail will definitely survive but will have to adapt to this more flexible and diverse model that the consumers demand, according to Yates.