Prime retail rents in the world's leading retail destinations have stabilized across the globe, with some markets now witnessing rental growth as the economic recovery gathers momentum and consumer confidence starts to improve, according to CB Richard Ellis's (CBRE) latest Global Retail Market View. Demand for prime retail space in most markets remains strong, with some cities seeing substantial annual growth at the end of the third quarter (Q3) of 2010.
Prime retail rents globally increased by 0.2% from the second quarter to the third quarter of 2010. Rents on a year-on-year basis grew in three of the major global regions, with the Americas seeing the highest rental increase (6% year-on-year), Asia following with a 4% increase and the Pacific region growing by 3% year-on-year. In contrast, rents in Europe, Middle East and Africa (EMEA) fell by 3% year-on-year in Q3 2010, largely due to the effects of the economic downturn in markets including Spain, Ireland and Greece. However, rents remained largely stable in most EMEA markets in Q3 and some cities have seen significant annual rental growth, with Edinburgh and London growing by 25% and 20% respectively compared to the same period in 2009.
New York City continues to dominate as the world's most expensive retail market, with prime rents at US$1,800 per ft² per annum. Sydney moved into second place globally (from third in Q2 2010, at US$1,218/ft²/annum) and Hong Kong ranked third (US$1,113/ft²/annum). London remains in fourth place, after recording a 20% annual increase in retail rents year-on-year (now US$891/ft²/annum) and Tokyo rounds out the top five locations (US$804/ft²/annum).
Emerging markets continue to outperform some of the more mature economies with Latin America's economic performance continuing to outpace North America due to the ongoing growth of the region's middle class and the demand for commodities on a global basis. Sao Paulo has seen some of the fastest growing retail rents in the past 12 months with a 30% increase year-on-year. Rio de Janeiro also features in the top five fastest growing markets with 23% annual growth.
Commenting on retail trends in the EMEA region, Peter Gold, Head of Cross-Border RetailEMEA, CBRE, said: "Consumer confidence across Europe in 2010 has been volatile but we are seeing marked improvements compared to last year. However, retailer confidence has entered positive territory for two consecutive months in September and October 2010 for the first time since early 2008. Retailers continue to target the best stores in the best locations and this is exacerbating the polarization of the market between the best and rest. Whilst vacancy levels are low in most prime retail destinations, many secondary locations are at record highs."
Europe, Middle East and Africa
London, Paris and Zurich (respectively) top the retail rents ranking in the EMEA region, with London overtaking Moscow as the fourth most expensive market in the world in Q3 2010. Although Europe has been trailing behind Asia and the Americas in terms of the global recovery, GDP growth in Western Europe has been stronger than expected, particularly in Germany where the economy grew by 2.2% in the second quarter of 2010. Europe continues to remain an attractive target for international retailers and occupier demand for prime retail locations has been relatively strong, with vacancy levels low and prime rental levels remaining stable. Over the last quarter (Q3), rents remained flat in the majority of locations. Zurich and Oslo have seen some of the most significant rental increases quarter-on-quarter with 6.7% and 7.1% growth respectively, with the largest rental falls in Madrid (-14%) and Abu Dhabi (-8.3%).
U.S. cities continue to lead the most expensive retail rents in the Americas region. Los Angeles and Chicago rank at 12th and 13th respectively within the global ranking, following New York as the most expensive destination in the world. Stability has returned to U.S. retail markets in 2010 and