Retail rents on the rise in London: new study
A new study has shown that central London retail rents are on the rise as international retailers use the capital to launch or strengthen their brands.
The quarterly research by global property advisor CBRE Group, in which it ranks the top 10 global retail markets, shows that New York, London, Zurich and Tokyo all saw increases in prime retail rents in the second quarter of 2013.
CBRE said that growth had been driven by historically low construction levels and fierce retailer competition for the best locations, which had led to record-breaking rents in many global markets.
For the London retail market, the study suggests that improving consumer confidence, robust sales and increased foot traffic had collectively fuelled tenant demand. According to CBRE’s research, 23 new international brands arrived in the city last year despite the maturity and competitiveness of the market. In particular, CBRE said that a supply and demand imbalance on New Bond Street and Old Bond Street had resulted in prime rents for central London increasing by 9.1% quarter-over-quarter and 20% year-on-year.
Never Miss a Retail Update!Steven Stedman, head of CBRE’s central London retail agency, explained: “London is experiencing consistent rental growth due to the strong demand from global retailers from all over the world that continue to see the UK capital as a platform to launch or strengthen their brand profile in both European and Asian markets.”
Despite the high rents, CBRE found that retailers are continuing to establish a presence in Hong Kong as they look to benefit from the market’s growing luxury retail scene. According to CBRE research, 51 new retailers opened stores in Hong Kong last year and the city has the highest representation of luxury retailers of all global markets.
Hong Kong (US$4,328 per sq ft per annum) topped the CBRE rankings by a substantial margin, with New York ($3,050 per sq ft per annum) in second position posting prime rents $1,200 per sq ft below Hong Kong. Similarly, a large spread of more than $1,800 per sq ft per annum exists between New York and third-ranked Paris ($1,220 per sq ft per annum), with London close behind ($1,156 per sq ft per annum).
Joe Lin, CBRE’s executive director retail Hong Kong, added: “Healthy tourist arrivals and lack of available space make finding an adequate unit in Hong Kong’s prime retail locations a major challenge for new and existing retailers. Units in prime locations with reasonable shop fronts and size rarely become available, leaving retailers with few choices. As such, preference for spaces with these characteristics continues to generate strong demand, supporting the market’s high – and rising – prime rent levels.”
According to the research, prime rents were stable in Paris in the quarter while ninth placed Moscow faced a supply and demand imbalance with low vacancies and high demand from fashion retailers and service providers.
Preference for prime space continued to impact prime rents in Zurich ($896 per sq ft per annum) where rents increased 2.2% quarter-over-quarter and 5.6% year-on-year.
