For the third year running, luxury brands’ demand for prime store locations means that Hong Kong once again bags the spot for having the most expensive retail rents in the world.
Global property advisor CBRE Group, Inc’s Q4 2013 Global Retail Rents report finds that rents in Hong Kong hit a record US$4,334 per square foot per annum for prime retail space, substantially out-pricing the runner-ups of New York or Paris by over $1,000 per year. Increased international demand from luxury brand retailers and a lack of development were driving factors, according to the report.
“Asia’s retail centers continued to grow and rents continued to increase, with gateway cities like Hong Kong, Tokyo, and Singapore attracting retailers new to the region, and retailers established in these centers beginning to spread into emerging markets,” says Sebastian Skiff, CBRE Retail’s executive director. “This is helping to increase competition for space particularly in prime areas.”
Due to the influx of shoppers from mainland China, luxury retailers are focusing on the prime areas of Russell Street in Causeway Bay, Canton Street in Tsim Sha Tsui, and Queens Road Central in Central, over secondary areas. Combined with the very limited supply of space and low vacancy, are causing rents to hit the roof, says Skiff.
Despite a projected million square feet of retail space expected to come on line by the end of 2014, Skiff believes that it will not ease rent prices much, since most of the space will not be located in prime areas. “The majority will be located on secondary streets that are less appealing to niche brands,” says Skiff.
Meanwhile, Beijing came in as the only other Chinese city on the list in 10th place. With an average price of US$681 per square foot per annum in 2013, demand for space grows along divided lines. International retailers continue to crave prime retail space in core areas, while existing retailers will start to seek space in secondary locations. Shopping malls, especially those in secondary locations, become increasingly popular for food-and-beverage operators, due to high foot traffic potential. Like Hong Kong, retail rent is only expected to climb in Beijing in the next year as more businesses strive to secure top-tier locations.