There is finally some good news in the land of retail rent. According to research conducted by CBRE, a real estate services and investment firm, global retail rent grew by 4% in 2013, and is expected to continue to rise in 2014, especially in popular markets.
The growth seems to be a result of the lack of prime retail space available in some of the most expensive markets in the world, such as Hong Kong, Paris and New York. In 2013, a square foot of space cost US$4,333 per year in Hong Kong, US$3,150 in New York and US$1,426 in Paris.
Additionally, there also appears to be a shortage of new retail development, which makes the fight for limited existing space even more competitive and costly. This is especially true in Hong Kong, where space in limited and demand is extremely high, especially among luxury retailers who know the importance of being a part of this booming global city. New York is also facing the same issue along its world-renowned shopping destination Fifth Avenue; space here is also limited, while demand and rent is at an all time high.
Though Hong Kong and New York are at the top of the rankings for rental price, they aren’t the only cities facing this issue. Higher rents are also affecting lower-tiered cities where the demand for flagship stores is growing. One such city is Zurich, where just one square foot now costs US$495 a year.
Forecasters did notice that rental prices seemed to slow towards the end of 2013, as retailers started exercising some caution where their business was concerned. However, prices are still predicted to climb in 2014, as lack of prime space will continue to be a huge issue.
The only way to address the rising prices is to build more prime retail space, but plans for expansion seem to be stagnant in most markets. In fact, in the U.S. retail development is at an all time low, while in parts of Europe redevelopment of current projects seems to be the only expansion discussion on the table. There are some exceptions, such as Paris and the London suburbs, were a few smaller projects are underway. While Europe and the U.S. are at a standstill, millions of square feet of retail space are being built in the emerging Asian markets. New malls are set to open in Bangkok, Manila and various cities in China.