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New York Still World’s Most Expensive Retail Market despite Rental Falls

Prime retail rents have fallen in almost every region across the world as the global recession impacts consumer sentiment and retail sales, according to new retail research from CB Richard Ellis (CBRE), Global Retail MarketView.

Demand for retail space has declined in most markets across the world as consumers cut back on spending and unemployment continues to rise in many countries. Emerging and less established markets have been most significantly affected. Buenos Aires saw the largest annual decline in retail rents year-on-year with a drop of 37%, followed by Warsaw with a 33% decline and Washington DC with a 26% decline. Whilst some markets have continued to experience year-on-year increases in retail rents, in many cases the current pressure is downward.

Prime retail rent represents a typical open-market headline rent that an international retail chain can expect to pay for a ground floor retail unit (either high street or shopping centre depending on the market) of the highest quality space in the best location in a given market.

Despite a 10% year-on-year rental decline, New York remains the world’s most expensive retail destination, with rental values totalling $1,800 sq ft per annum. New York’s retail rents stand at nearly double those of Hong Kong, which still ranks in second place globally with rents of $975 sq ft per annum. In an interesting switch, Moscow has superseded Tokyo in the ranking, moving into third place from fourth, followed by Paris and Tokyo respectively, making up the top five most expensive retail locations.

Nick Axford, Head of EMEA Research and Consulting, CB Richard Ellis, commented: “With unemployment rising and consumer confidence and spending weakening across most parts of the world, most retail property markets are experiencing reduced demand from retailers and an increase in the number of vacant units, which is in turn affecting rents.

“Some retailers are using this as an opportunity to take advantage of the weakening market conditions to negotiate more favorable lease terms. Landlords are keen to avoid vacancies, and in some circumstances this makes them more willing to compromise with tenants who are in a position to leave. However, landlords are tending to hold firm on the best space in the belief that any empty shops will be quickly taken up. More profitable retailers are actually jumping on rare opportunities to move into prime units whenever vacancies emerge in top high street locations,” Axford added. (press release)