Hong Kong has highest retail rents but Paris and London lead rental growth index
There may be fears that luxury is set to slow down but that’s not holding back rental values on the world’s key luxury streets. Russell Street in Hong Kong’s Causeway Bay district has just been named as the world’s most expensive retail street by rental value, unseating New York’s Upper 5th Avenue, according to property consultants Cushman & Wakefield.
Meanwhile, a day after a report saying London and Paris are Europe’s biggest retail markets, another study says that those two cities also contain the two streets that showed the fastest luxury retail rental growth in Q3.
Hong Kong’s Russell Street regained the top spot after New York’s five-year run at the top with its average annual rent being US$2,671 per square foot (HK$20,953), even though average rents there fell 1.5%, according to the annual Main Streets Across The World report.
The change came as Hong Kong retail rebounded after some bruising years in which it was a problem location for many local and international retailers at all price levels. But with Chinese tourists arrivals increasing, it’s once again the place to be, especially for luxury labels.
Upper 5th Avenue in New York fell to second place with average annual rents of US$2,250 per sq ft, another figure that was down on the US$3,000 per sq ft in the previous 12-month period, due to a rise in vacancy rates.
London’s New Bond Street was the most expensive European street and came in at number three globally with rents broadly flat year-on-year at US$1,744 per sq ft for the past 12 months as a whole. Avenue des Champs Élysées in Paris and Milan’s Via Montenapoleone were fourth and fifth.
While Causeway Bay took the overall top spot, Tokyo’s Ginza was the second most expensive Asian street, with annual rents at an average of US$1,219 per sq ft. And Beijing’s Wangfujing topped the chart for China, with rents at an average of US$482 per sq ft a year, putting it in 11th spot globally.
Q3 RENTAL GROWTH
Given that some of the locations at the top of that chart saw average rents falling, it’s also interesting to see another new report picking out the streets that are seeing the fastest rental increases in a short period - the third quarter of this year.
The study from international real estate advisor Savills said Avenue Montaigne in Paris topped the league with a 20% year-on-year rise.
The company analysed the prime indicative asking rents across the core luxury retail locations in 25 global retail cities to create the ranking, with Avenue Montaigne’s Zone A reporting an increase from €15,000 to €18,000 per sq m a year.
London, Madrid and Stockholm saw the next greatest growth, with the prime luxury area in each showing an 11.1% year-on-year rental increase, although London’s rents are the highest of these three (and higher than the Paris street too). On London’s recently refurbished Bond Street, Q3 Zone A rents are €30,140 per sq m a year at the moment. That's interesting given that the Cushman & Wakefield report showed no growth across a 12-month period and suggests that the street's recent upgrade has spurred landlords to push up rents and ignited demand from luxury tenants.
Meanwhile in Madrid, rents on José Ortega y Gasset are €2,400 per sq m. In Stockholm, rents on Birger Jarlsgatan are €1,920 per sq m.
In fact, Europe dominates as far as luxury retail rental growth is concerned, taking six of the top nine spots with Frankfurt’s Goethestraße seeing 6.7% growth and Munich’s Maximilianstraße edging up by 2.3%.
But Asia Pacific is also seeing significant growth with Collins Street in Melbourne, Castlereagh Street in Sydney and Hong Kong’s Canton Road/Central also in the top nine.
Marie Hickey, retail research director at Savills, said: “The last year has seen European cities dominate in terms of luxury rental growth. Paris was by far the strongest performer, driven by improved occupational demand on the back of an improving tourist market, particularly from China.”
Anthony Selwyn, head of London and international retail at Savills, added: “Significant rental growth in each of these ultra prime luxury locations underlines how important strategically located physical stores remain for global retailers. This is further supported by strong consumer spend on luxury, despite various economic headwinds affecting the retail sector more generally.”
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