77 029
Fashion Jobs
Loss Prevention Detective
Permanent · Holyoke
District Loss Prevention Manager - Maple Grove, mn
Permanent · Maple Grove
Part Time Cleaning Associate
Permanent · Amherst
lp Detective Princeton, nj
Permanent · Princeton
General Manager - Marketplace @ Semino
Permanent · SANFORD
Full-Time Sales Supervisor - Softlines
Permanent · Fayetteville
Outside Sales Representative- Cosmoprof- Denver CO
Permanent · DENVER
Ralph Lauren Stores - Sales Professional, Part Time
Permanent · Washington
Sales Professional,Full Time
Permanent · Washington
Asset Protection Detective, Reno Meadowood - Full Time
Permanent · Reno
Asset Protection Clerical, Herald Square - Full Time
Permanent · New York
Retail Sales Jewelry Clerical, Security Square - Part Time
Permanent · Baltimore
Asset Protection Detective, Wheaton Plaza - Part Time
Permanent · Wheaton-Glenmont
Manager, Customer Experience And Sales
Permanent · Glendale
Manager, Asset Protection - Multi Store
Permanent · Pasadena
Senior, Technical Product Manager
Permanent · Johns Creek
Manager, Asset Protection
Permanent · San Jose
Asset Protection Detective, Aventura - Part Time
Permanent · Aventura
Asset Protection Detective, South Park - Part Time
Permanent · San Antonio
Asset Protection Investigator, Tulsa - Full Time (2840)
Permanent · Owasso
Beauty Account Coordinator
Permanent · Garden City
Asset Protection Security Guard, Center City - Flex
Permanent · Philadelphia
Apr 22, 2013
Reading time
3 minutes
Download the article
Click here to print
Text size
aA+ aA-

Super-rich close gap between bonds and Bond Street

Apr 22, 2013

LONDON - Insatiable demand among the global super-rich for swanky retail property in Europe has driven rental returns on the best shopping streets so low they are not much higher than the safest government bonds.

As the wealthy shield cash from the hazards of the financial crisis in the world's most upmarket real estate, it has widened the gulf between the best and worst retail streets, a chasm already yawning under the influence of sluggish spending by the less well heeled and an exodus of shoppers online.

London's Bond Street is the most extreme example in Europe, according to property consultant Cushman & Wakefield. Yields, or the annual rent as a percentage of a property's value, were 2.75 percent at the end of the first quarter this year.

It is the first time yields have fallen below 3 percent since the company's records began in 1991 on a street that includes Prada, Louis Vuitton and Cartier.

"The wealthy choose to buy parts of Bond Street like the rest of us buy a tie," said Stephen Hubbard, UK chairman of property consultant CBRE. "The potential for rental growth is very good, so they are not stupid things to buy."

Ten-year benchmark UK government bonds yields are about 1.7 percent, according to Thomson Reuters data, while they are 1.25 percent in Germany, 1.8 percent in France and 4.2 percent in Italy. Thirty-year bonds are about 3 percent in the UK and France.

Investors typically seek higher returns from property than bonds due to the fact real estate takes longer to buy and sell and risks becoming vacant. Yields for the top office blocks in the major European cities are about 5 percent.

With low interest rates keeping government bond yields down, many asset managers have returned to property, which had become something of a pariah asset class after the sub-prime real estate collapse triggered the global financial crisis.

The second-lowest figure was 3.25 percent on Kaerntnerstrasse and Kohlmarkt in Austrian capital Vienna, followed by 3.75 percent on Avenue des Champs Elysées in Paris. The list of major European cities includes Zurich, Hamburg and Stockholm. Vienna matched its 10-year average, while all other cities were below.

Shop properties on the best streets attract such strong interest because the deal size is within the reach of wealthy individuals whereas an office block worth several hundred million euros is not, said David Hutchings, head of European research at Cushman & Wakefield.

While many wealthy buyers remain anonymous, there is currently strong interest in Bond Street from Hong Kong, said Jonathan O'Regan, director of central London investment at property consultant Savills.

It has driven prices up to 6,500 pounds ($9,900) per square foot for the pricier jewelry section compared with about 1,000 pounds on King's Road in the select Chelsea district, meaning shops can change hands for between 20 and 100 million pounds, depending on size.

The proportion of Bond Street stores owned by British and Irish funds dropped to 39 percent in 2011 from 96 percent in 2006, according to Savills. The different nationalities in 2012 included Chinese, Qatari, Libyan and Danish, it said.

Meanwhile, yields for retail property outside the best locations can exceed 10 percent, a premium that represents the much higher risk of vacancy. Last week Britain's biggest supermarket chain Tesco scrapped development plans for more than 100 of its sites as shoppers were spending less or making their purchases online.

In addition to investors, many retailers are buying properties in the most sought-after locations to ensure they are not turfed out or to avoid spiraling rents.

Companies that have done so on Bond Street, where rents are about 25 percent higher than on neighboring Oxford Street, the country's second priciest strip, include luxury goods group LVMH and Hermes and the Maramotti family behind luxury clothing retailer Max Mara. Spain's Inditex has done the same for its Zara fashion store on Oxford Street.

Retailers are investing in fewer, better pitches due to weaker consumer spending in outlying areas and a growing trend to buy online.

"These locations become a combination of a sales outlet and advertising," said Dennis Lopez, chief investment officer at Axa Real Estate, Europe's largest property owner, with 43 billion euros of real estate under management.

"I see a continuation of demand for the best spaces, but these trends are like pendulums. A 2.75 percent yield looks pretty low to me."

© Thomson Reuters 2023 All rights reserved.