Luxury Retailers are Thriving Throughout Top Global Markets and Prime Cities in Asia

International real estate services firm, Colliers International, today releases its global retail report, which revealed a promising global outlook for the retail markets, led by ongoing recovery in the United States, the strong performance of high street markets and growing development in emerging markets.

Luxury retail continues to show strong growth in the top global markets – including Paris, London and New York – and prime cities in Asia. International brands are on the prowl for new markets in which to expand.

The study looks at 125 retail real estate markets in 50 countries across the globe and offers insights into current performance and trends for the near future. 

One key factor driving luxury sales is an increasing consumer confidence level, with improvements recorded in 52 per cent of the markets surveyed by Nielsen’s 2Q 2014 Global Consumer Confidence Survey.  The rising consumer confidence level is due in part to a fading memory of the recent global economic crisis.   Another factor in the growth of luxury retail is the sizable gain in income of the highest earners, driving an increased propensity to spend.

Worldwide, New York’s Fifth Avenue has the most expensive retail rents at US$3,550 per sq ft per year, followed by Hong Kong’s Queen’s Road Central and Canton Road (Tsim Sha Tsui) at US$2,073 per sq ft per year and US$2,011 per sq ft per year, respectively.

Nonetheless, optimism is tempered by threats to global economic growth and the spectre of e-commerce.  To combat competition from the internet, retailers are adopting new strategies to lure shoppers, such as using space as a showroom to create an “experiential shopping” environment.

Mr Simon Lo, Executive Director of Research & Advisory | Asia at Colliers International, says, “Asia, particularly China and India, are significantly impacted by the increased popularity of e-commerce. Top-end brands will continue to stay in core areas, but mid-tier brands will be moving to decentralised sub-markets, as the new supply of retail stocks in core districts of some cities such as Seoul and Singapore is limited.”

Ms Chia Siew Chuin, Director of Research & Advisory at Colliers International, says, “As a gateway market to Southeast Asia, Singapore remains a desirable market for new brands and an attractive destination for international occupiers.  However, despite the demand for space by new stores and food and beverage (F&B) outlets, the retail environment is challenging due to rising costs, shrinking profits and a tight labour market.”

Ms Chia adds, “The physical retail trading environment will also remain tough and demanding on retailers and F&B operators due to increasing competition from e-commerce retailers and online food delivery services.  Consequently, retail space rents, which have generally remained unchanged during the year, are likely to remain flat in the near future.”

In Asia, Singapore’s Orchard Road ranks seventh with retail rents at US$348 per sq ft per year.

Other key findings of the report include:

  • Luxury retailers are in the sweet spot. Luxury retailers are benefitting from income gains among the top earners and are thriving throughout many of the top global markets – including Paris, London, New York and prime cities in Asia. The growth in this sector is a key factor in driving expansion worldwide.
  • New supply is robust in developing markets. The global expansion of the workforce and the middle class is spurring a need for new supply, which is concentrated in developing countries across Europe, the Middle East and Asia that have economic growth, political stability, a growing middle class and business-friendly regulatory environments. 
  • Optimism is tempered by threats to global economic growth and the spectre of e-commerce. E-commerce is affecting both traditional and luxury retailers across the globe, exerting pressure on merchants to become more creative with concepts regarding their use of space. One popular strategy is to transform stores into product showrooms in an attempt to entice greater foot traffic and additional online sales.
  • Strong performance of high street markets and growing development in emerging markets. The generally positive outlook is underpinned by the economic recovery in the U.S. and strong job growth in many parts of the globe.

To download a copy of the report – Global Retail Highlights 2014, please visit www.colliers.com/globalretail.