Low Construction Rates Of Prime Retail Space Foster Stiff Competition
Though it lags far behind Hong Kong, which remains far and away the world’s most expensive retail market, Beijing has cracked the top ten in a new report on the global retail property market. According to the latest study by CBRE, rising prices in Beijing follow what’s being seen in other top ten markets, among them London, Paris and Sydney — historically low construction rates of top retail space, which leads to low availability levels and fierce competition.
Commenting on Beijing’s inclusion in the top ten, CBRE Retail – Asia executive director, Sebastian Skiff, said:
With the strong momentum driving the China retail industry and the China economy as a whole, it comes as no surprise that Beijing is featured in the top 10 list. We expect consumer market performance to provide, albeit at a healthier pace, the continued background for growth over the next 2 to 3 years in the retail property market. Our view is that both the consumer and retailer will be focusing more on quality rather than quantity. We see this is in a number of the latest development projects we are involved in with – much greater attention from developers to create a quality retail environment. Retailers will also, in the main, we expect – be focused on improving their existing store networks either by size, position, assortment or in design/experiential/service aspects.
Maintaining its place at the top of the rankings, with average rent in prime areas sitting at US$4,335 per square foot in Q4 2012, is Hong Kong. Despite more muted demand as brands have slowed their aggressive expansion efforts in the pricey retail powerhouse, CBRE notes that top-tier space remains in high demand. Last year, Hong Kong hit a milestone celebrated by property owners and few others, as rent in Causeway Bay surpassed New York’s Fifth Avenue as the world’s most expensive. This remains a problem for small business owners — as Jing Daily columnist Cedric Delzenne wrote last year — with high and rising rents forcing many out of business.
As Joe Lin of CBRE noted, “The flipside to [Hong Kong's high rent] is that local retailers, who are not primarily targeted at tourists, cannot afford the increasing rents and in some cases are forced to relocate, which is resulting in less choice in prime districts. With the prime areas packed with Chinese tourists, local residents are also beginning to shift to the outskirts of the city for their shopping. However, Chinese tourist spending was beginning to slow towards the end of last year and rents are not anticipated to rise dramatically in 2013 given their already high levels.”