Pricey CBD ranks 6th in global retailer cost
Hong Kong, New York and Tokyo top the most-expensive list.
Both Sydney and Melbourne rank above Zurich, Paris and Moscow.
Hong Kong and New York recorded significant rises in prime retail rents during the third quarter of 2012, while the next tier - Tokyo, Sydney and London - held steady.
"Hong Kong and other Asia Pacific markets have benefited from international retailers - particularly fast-fashion, cosmetics, jewellery watch, and mid-range fashion retailers - aggressively seeking prime locations across the region," CBRE chief economist Ray Torto said.
Sydney remains the most popular market for international retailers entering Australia but Melbourne's prime CBD locations were also in strong demand, the group said.
That interest has become more evident this year with several top-tier brands - Thomas Pink, Rhodes & Beckett and TAG Heuer - opening, or planning, new stores in Melbourne's Collins Street.
Rental growth in Sydney experienced a rise in the third quarter, thanks to greater leasing activity, but growth was likely to moderate in the coming months amid weak consumer sentiment, CBRE said. Global retailer activity remains polarised with prime, high-street space in the best markets experiencing the greatest demand, it said.
The scarcity of top-tier prime retail space in both Sydney and Melbourne results in the market giving it a premium and vaults them both into the global ranking.
In New York rents on Fifth Avenue rose 17 per cent quarter-on-quarter as international retailers sought flagship space, where consumers spend on luxury goods and services.
Frequently Asked Questions about this Article…
CBRE research found Melbourne’s prime CBD locations are in strong demand and scarce, which pushes rents up and places the city sixth globally. High demand from international retailers for limited top-tier retail space — especially on streets like Collins Street — creates a premium compared with other cities.
According to the CBRE research, Hong Kong, New York and Tokyo topped the most-expensive list, with Sydney and Melbourne ranking above other major markets such as Zurich, Paris and Moscow.
CBRE highlighted international retailers — particularly fast-fashion chains, cosmetics, jewellery and watch brands, and mid-range fashion retailers — as aggressively seeking prime locations. In Melbourne, examples include Thomas Pink, Rhodes & Beckett and TAG Heuer opening or planning stores on Collins Street.
In the third quarter of the period covered by the report, Hong Kong and New York recorded significant rises in prime retail rents. New York’s Fifth Avenue rents rose about 17% quarter-on-quarter as international retailers sought flagship space, while markets like Tokyo, Sydney and London held steady.
Scarcity of prime retail locations results in a market premium for that space. For investors, that can mean stronger rental income potential and higher valuations for well-located retail assets, but it also implies competition for acquisitions and sensitivity to changes in retailer demand.
CBRE warned that rental growth — especially in Sydney where leasing activity lifted rents in the referenced quarter — could moderate in coming months because of weak consumer sentiment. Slower consumer spending can reduce retailers’ willingness to pay top rents or expand into new flagship locations.
The report describes global retailer activity as polarised: the strongest demand is for prime, high-street space in the best markets. That means flagship locations in top CBDs attract most international entrants, while less prominent retail locations see far less interest.
Investors should weigh high demand and potential rental premiums against factors such as limited supply (which drives prices up), sensitivity to consumer sentiment, and the reliance on international brands for leasing activity. Understanding local vacancy, tenant quality and broader economic conditions can help assess risk and return.
Call 1300 880 160
Start a chat
Schedule a call
