Rental rates for retail space have lowered, but both Moscow and Kiev are listed in the Global Top 10 Retail Strips.
For a second consecutive year, premier street front rents in almost every region of the world moved lower during the past 12 months.
As the lingering effects of the global downturn reduced demand for some of the world’s most prime real estate, rents followed suit. Despite an improved global economic landscape, retailers were still expressing caution in terms of expanding and committing to new stores. Evidence was mounting, however, to suggest the worst of the downturn was over and high-end retailers would be back pressing for more high profile stores.
The ROB Claymore/Robb Report Global Luxury Index ETF, for example, shows a significant bounce back beginning early- to mid-2009 as investors began to sense that high-end consumers had begun to resume their big spending ways after nearly a two year hiatus. Two sub-categories worth mention are financial centers, which are still sluggish but not to the same extent as a year ago, and tourism-dependent cities, which were more mixed but generally up relative to last year. With many of the world’s rich feeling more secure and comfortable with luxury purchases, demand for high-end retail premises is expected to increase over the coming year.
With the global economy gaining traction and credit markets improving, retailers with a strong balance sheet are quickly gaining the confidence to expand into markets previously viewed as too expensive or difficult to penetrate. Although a move to discount retail is apparent in many countries, luxury retail is still a viable sector and one that is still in a long-term uptrend. The emergence of a sizeable middle class in Asia Pacific, the Middle East and central and eastern Europe is sure to continue, and these “aspirational” consumers will be a key source of growth for many luxury retailers.
As for the rental rates, the most expensive streets in 2010 are Champs – Elysees in Paris (more than $ 13,500/m²/year), New York’s Fifth Avenue at $13,500/ m²/year (with 10% decrease against 2009) and Russel Street in Hong Kong at $ 12,970/ m²/year. Moscow’s Tverskaya is 22nd on the list with $4,000/m²/year rental rate, falling behind such cities as London, Milan, Sydney, Zurich, Rome, Vienna, Berlin, Munich, Tokio, etc.
Galina Maliborskaya, Agency Director, Retail Property Department Colliers International: «In the time of recession street-retail was the most badly hit segment of the Moscow retail market. This can be explained by the fact that rental rates on the main retail streets in Moscow used to be the highest in the world. Before the crisis, retailers were able to sustain such a high level, virtually paying for an expensive shop-window that did not pay off. In the crisis circumstances this became unacceptable for many retailers, which caused a sharp decline in demand and consequently rates decrease. On the other hand, tenants were reluctant to conclude long-term deals, anticipating that things will change. And the situation is already changing.
Source: Colliers International