New York's Upper Fifth Avenue has surpassed Hong Kong's Causeway Bay as the world's most costly shopping area, according to Cushman & Wakefield's flagship retail research report, Main Streets Across the World.
In the 12 months to September 2014, prime retail rents climbed by an average of 2.4 percent around the world, with the recovery continuing but at a slower pace. Some markets were impacted by volatile and somewhat reduced economic activity, while others were impacted by structural changes. Despite the slower pace of rental growth, 277 of the 330 locations surveyed were either unchanged or grew year over year. Property finder
The report's highlights include: New York's Upper Fifth Avenue is the world's most expensive retail area, with rents reaching a record $3,500 per sq ft per year, while Hong Kong's Causeway Bay saw a 6.8% drop in rentals and slipped to second place.
With a 30 percent increase over the previous year, San Francisco leads the way in global rental growth.
Although the city of Paris grew by 6% overall, rental values in the Champs-Élysées remained unchanged after a 40% increase the previous year - the street now ranks third.
New Bond Street in London is still in fourth place, with rentals up 4.2 percent.
The top five are rounded off by Pitt Street Mall in Sydney, which has jumped three places thanks to a 25% increase.
In the 12 months leading up to September 2014, global prime retail rents increased by 2.4 percent.
The Americas experienced the fastest growth, with prime rents up 5.8%, the same as last year, while EMEA saw a moderate 1.3 percent increase and Asia Pacific saw a 3.6 percent increase.
This year's rankings of the most expensive retail locations in each country saw significant changes. Upper Fifth Avenue in New York achieved a new high of $3,500 per sq ft per year, leapfrogging Causeway Bay, which saw rentals decline by 6.8%, to take the top spot.
According to John Strachan, global head of retail at Cushman & Wakefield, "New York is once again the most expensive shopping destination in the world, and Upper Fifth Avenue has set a new record for the highest retail rentals ever recorded for the first time since 2011. As major businesses compete for prime addresses in the world's biggest cities, global gateway markets continue to grow."
Despite no change in rental rates after a 40 percent increase last year, Paris' Champs-Élysées remained in third place, followed by London's New Bond Street in fourth place, where rentals increased by 4.2 percent. Pitt Street Mall in Sydney rounded out the top five, jumping three spots thanks to a 25 percent increase in the number of international retailers that have taken up significant units in the last six months.
The Americas once again led the way, with premium rental values increasing by 5.8%, identical to the rate seen in 2012/2013. The United States and Mexico were the primary drivers of its expansion, whereas Brazil was a stumbling block.
Matt Winn, global retail COO and head of retail in the Americas at Cushman & Wakefield, said, "The retail market in the United States has continued to benefit from positive economic news and strong retailer fundamentals. Prime rentals increased by 10.6% in the year to September compared to the same period last year. Good merchant demand and strong tourist numbers fueled expansions across the country, with gateway cities like Los Angeles, San Francisco, and New York seeing double-digit growth in particular. The emergence of firms like Microsoft, which just unveiled its first flagship store on New York's Upper Fifth Avenue, has further added to the importance of these high-end shopping districts."
The normally buoyant Hong Kong market was adversely affected by a fall in retail spending and weaker tourism growth, resulting in a slower expansion in Asia Pacific (3.6 percent).
Cushman & Wakefield's head of retail in Asia Pacific, James Hawkey, stated, "Despite the fact that New York came in first this year, Hong Kong's Causeway Bay remains the world's second most costly retail location. In 2014, shops in Hong Kong were cautious about growing due to slowing sales and less enthusiastic consumption from mainland visitors. Luxury brands remained cautious, while watch and jewelry merchants significantly reduced new store openings, resulting in negative growth in this category. Several of the city's most well-known retailers reported reduced Christmas sales. Since the beginning of the 'Occupy Central' demonstration in Hong Kong at the end of September, retail sentiment in the core retail locations has fallen even more, particularly in Causeway Bay and Mong Kok, where students are currently blocking key major roadways."
Occupier conditions in the EMEA area were generally firmer and better, as shown by a stabilization of rents in markets that had previously seen significant rent falls. However, major decreases in the Middle East slowed EMEA growth (1.3 percent). Indeed, premium rental increase in Europe (2.3%) was similar to that of 2012/2013.
Cushman & Wakefield's head of EMEA retail, Justin Taylor, stated, "Europe's gateway cities are thriving, and emerging markets are witnessing increased demand as well. Countries like Portugal, Ireland, Spain, and Greece, which had experienced dramatic drops in prior polls, had good to strong growth in the 12 months to September. Meanwhile, leasing activity in mature core markets such as the United Kingdom, France, and Germany remained strong, particularly in the prime class. Indeed, high demand for luxury retailers in places like Paris and London, along with the limited quantity available, continued to push up rents in the finest locations, with new tenants paying huge premiums to obtain their desired space. Turkey is also making a comeback, thanks to increased consumer spending, a growing middle class, higher-quality retail space, and the presence of more foreign merchants."
According to Martin Mahmuti, a senior investment analyst with Cushman & Wakefield, "The trend of major retail brands experimenting with design, layout, content, and services as they reinvent the concept of their flagship stores is continuing to have an impact on major gateway city markets and will continue to be a key factor influencing growth in the coming year. Despite the continuing uncertainty in some parts of the world, particularly Asia Pacific and the Eurozone, retail market activity is likely to improve in the coming year. As retailers seek to establish a presence and improve their brand recognition, premier shopping locations will continue to be in high demand, but availability will remain scarce. The rise of internet purchasing, which is fueling market polarization in favor of the biggest and greatest, will increasingly drive retailer development strategies while also affecting local markets structurally."
The research is widely regarded as the global retail market's barometer, ranking the most expensive areas among the top 330 shopping destinations in 65 countries.