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World retail market rebounds in 2013 as retailers vie for flagship locations But Madison Avenue overtakes London in the global shopping street rankings

The world’s premier retail locations have rebounded in 2013 according to Colliers International’s annual Global Retail Highlights report. Whilst New York’s Fifth Avenue retained the top spot as the world’s most expensive shopping street, London’s Old Bond Street has slipped down from fourth to fifth place in the table due to monumental rental growth by New York’s Madison Avenue.
The top ten line up also reveals that Paris’s Avenue des Champs-Élysées has fallen five places from fifth to tenth place. Moscow has again been named as the 'most expensive city' in the world, with the main shopping corridor, Tverskaya Street, in eleventh place. 

The Top Ten Global Retail Rents USD/BPS* per sq meter/year:
1. New York, Fifth Avenue - $ 32 817 (£1,900)
2. Hong Kong, Queen’s Road Central - $ 22 441 (£1,300)
3. Hong Kong, Canton Road, Tsim Sha Tsui -$ 21 441 (£1,241)
4. New York, Madison Avenue - $ 14 247 (£824)
5. London, Old Bond Street - $ 13 151 (£761)
6. Hong Kong, Causeway Bay - $ 11 978 (£693)
7. Zurich, Bahnhofstrasse - $ 10 000 (£579)
8. Sydney, Pitt Street Mall - $ 9 366(£542)
9. Milan, Via Monte, Napoleone - $ 8 989 (£520)
10. Paris, Champs-Élysées - $ 8 968 (£519)
11. Moscow, Tverskaya street – $ 7 987 (£466)

As international and luxury brands have expanded to new markets, this has prompted souring rents in 69 highly coveted global locations, and rising demand for retail presence in key tourist destinations. Higher year-over-year rents were reported across the world’s major shopping streets, with the 129 prime locations surveyed, 69 posted higher year-over-year average rental rates, 41 were flat, and 19 were down.

Despite dropping a place in the rankings, demand for flagship space in London has continued to exceed supply, driven largely from international retailers seeking a share of the spoils. Rents on Old Bond Street have risen by 20% in the last year. 

Mark Charlton, Head of UK Research and Forecasting at Colliers International, “London’s Luxury Quarter presents international shoppers with a unique retail proposition due to its distinguishing core streets juxtaposed with distinct culture and heritage. Demand from high end retailers has generated strong rental growth not only on Bond Street, but also the peripheral streets such as Dover Street, Conduit Street and South Molton Street. In addition, demand for international flagship stores has benefited Regent Street, which has witnessed double digit annual rental growth.

“Due to the lack of supply of prime units, luxury retailers such as Dior and Jimmy Choo are now looking to expand their space into additional floors of their existing premises in order to display their full range and accommodate VIP areas.”

The report also points to several global retail property market trends in the commercial real estate market for the first half of 2013:

Europe Paints a Diverse Picture: The strongest performing European cities after London were Oslo (+28.6%), Copenhagen (+22%) and Vilnius, Lithuania (+18.8%). Oslo has benefited from a strong Norwegian economy compared with much of Europe, and is experiencing high demand on its small high streets. Here, landlords are very active and short leases are common, leading to large churn on the high street. In Lithuania, Vilnious’ growth has been driven by demand local and regional retailers expanding across the Baltics. Europe’s worst performers were Sofia, Bulgaria (-34.2%), Cairo (-28.6%) and Kyiv, Ukraine (-20%). Kyiv’s main shopping street has reportedly suffered since the opening of Ocean Plaza shopping centre 2km away and unlike many high streets, suffers from overly large retail units. 
Tourism Drives Retail Sales in Hong Kong: Despite slow economic growth in China, tourist spending has helped maintain retail sales volume. In just three months, more than 12 million visitors flocked to Hong Kong, an 11.8 percent increase versus the same time frame in 2012. Further, nearly nine million of those came from mainland China. As international retailers expand to Hong Kong, the flurry of business has contributed to rising rents, forcing some retailers to second-tier streets.
Luxury and International Brands Expand in Australia and Brazil: Australia’s central business districts (CBD) in Sydney and Melbourne have been revived with many major international brands such as Zara, Apple and Topshop, along with luxury retailers. In Brazil, many retailers planned expansions based on a nearly 9% year-over-year sales growth in 2012, but that trend has not continued in 2013. The Brazilian Association of Franchising reports 122 new retail centers will be built in the next five years. Already the most expensive in Latin America, Brazil’s high street rents will continue to climb, with roughly 15% over 2012 in Sao Paulo.
North American High Street Rents Continue to Climb: North America has been one of the strongest performers in 2013: of note was Vancouver’s Alberni Street which reported a rental rises of 43%. In the U.S. there was an increase in rents across virtually every major city: in New York, rents on Fifth Avenue increased by 11% from the previous year— the most expensive in the world at $ 31 817 per square meter. In Las Vegas, rents on the Boulevard increased by 25%. Although U.S consumer retail spending continues its upward trend, major discount retailers such as Walmart and Kohl’s have shown little growth. 

Solomon Ets-Hokin, Chair of Retail Services at Colliers International, said “Many well-recognized brands, such as Apple, Zara, Topshop and Victoria’s Secret, are taking advantage of increased consumer spending, especially among tourists. In the U.S., Philadelphia’s Walnut Street emerged as a surprise with the fastest-rising rent in the nation, growing nearly 34 percent in the past year. Further, in emerging markets in Peru and Colombia, sustained growth of the middle class has significantly impacted retail sales and rising rents in shopping centers.”

“Retailers are working hard to remain competitive in an increasingly crowded marketplace," said Vikki Johnson, Senior Managing Director of Colliers International’s Retail Services Group in San Francisco. "The influx of new foreign brands into the U.S. market reflects their confidence in our economic recovery, with foreign tourists driving a large percentage of the increase in sales nationally. However, with the impacts of the government shutdown yet to be seen, unemployment still high, manufacturing and construction slowing, we can expect retail spending to level out or soften for the remainder of the year."