But slowdown shows signs of abating in Asia-Pacific
MORE than half the world's most expensive shopping streets have seen prime retail rents slump in 2009 - marking the biggest fall in retail rents in 24 years - a recent report from real estate adviser Cushman & Wakefield showed. Some 54 per cent of the 274 main streets across 60 countries monitored by Cushman & Wakefield saw prime rents fall in 2009.
New York's Fifth Avenue remained the world's most expensive street, though prime rents dropped 8.1 per cent to US$1,700 per square foot per year, Cushman & Wakefield said. Fifth Avenue has been the world's most expensive street for the last eight years. It was followed by Hong Kong's Causeway Bay, which showed a 15.1 per cent fall in rents to US$1,525 per square foot per year, while rents in Paris' Avenue des Champs Elysees were static at US$1,009.
Cushman & Wakefield's global head of retail, John Strachan, said the past year was one of the most difficult for the sector, with consumer spending and retail sales down in many markets.
'The good news, however, is that the worst is almost certainly now behind us,' Mr Strachan said in a statement, adding the annual survey's findings represented the biggest global fall in retail rents in its 24-year history. 'There will undoubtedly be some markets which will continue to be affected over the next year but we expect to see a greater number move back into positive territory,' he said.
By region, the average rent across Europe was US$235 per square foot per year, followed by Asia-Pacific at US$234 and the Americas at US$193. On average, rents fell 15.1 per cent in Asia-Pacific and 5.8 per cent across Europe, but rose 0.3 per cent in the Americas.
The biggest increase in rents was in Sao Paulo, Brazil, with rents at Alameda Lorena and Iguatemi Shopping rising 111 per cent and 79.3 per cent respectively. In Asia-Pacific, Ho Chi Minh City's CBD in Vietnam had the biggest increase at 50 per cent while in Europe, Rue St Catherine in Bordeaux, France had the biggest increase at 17.6 per cent.
At the other end of the spectrum, the biggest fall in rents was in Mumbai with Colaba Causeway falling 63.5 per cent. In the Americas, Rio de Janeiro's Sao Conrado Fashion Mall fell 53.4 per cent while in Europe, Bucharest's Calea Victoriei fell 48.1 per cent. The average rent across the 274 main street locations was US$213 per square foot.
Rental values across the Asia-Pacific region declined by 17.3 per cent. In light of the weak retail trading environment, it is not surprising that activity in the sector has been subdued in the past year, said Cushman & Wakefield in its report.
Weak economic fundamentals have severely affected the retail sector in a number of traditionally stable markets in the region, with headline rents declining and many retailers scaling back or postponing their expansion plans. Indeed, sentiment in the occupational market became increasingly cautious in 2009, which has led to negative rental growth - notably in India (-41.5 per cent), Malaysia (-17.6 per cent), Taiwan (-13.3 per cent), South Korea (-8.7 per cent), Japan (-8.3 per cent), Indonesia (-6 per cent), China (-5.1 per cent) and the Philippines (-4.2 per cent).
In Singapore, the emphasis for retailers has shifted from store openings to streamlining operations, which prompted a 14.4 per cent fall in rents over the year to June. Moreover, rents in the Orchard Road area are set to remain under pressure due to the large volume of new supply scheduled to come onto the market in the next 12-18 months, Cushman & Wakefield's report said.
In Hong Kong, June rents were down 17.7 per cent from a year earlier. The upper-middle market, Central, is feeling the effects of the slowdown in the luxury sector, while the middle-market Causeway Bay has remained reasonably healthy, on the back of the recent or imminent arrival of a number of international retailers. After this correction, in the short term at least, retail rents in Hong Kong are expected to remain stable until there is a marked improvement in consumer confidence.
Across the region, Vietnam was the only country to buck the general negative trend, with rents up 21.4 per cent nationally on the back of limited supply, particularly in Ho Chi Minh City. Current retail supply in Hanoi also remains limited, leading to low vacancy rates and helping to drive up rents in the prime areas.
Looking ahead, for the Asia-Pacific region as a whole, the slowdown showed signs of abating in the second quarter of 2009, with evidence of improved market sentiment beginning to emerge as financial stimulus packages began to show results, the report added.
'As a result, the outlook has become less negative and a period of stabilisation in values and activity appears to be underway,' it said.
Source: Business Times, 24 Sep 2009