Global downturn hits the world’s most expensive shopping streets

More than half of the world’s most prestigious shopping streets have been affected by the global economic downturn with 54% of the 274 streets monitored by real estate adviser Cushman & Wakefield, seeing their prime rents fall. The findings in the annual Main Streets Across the World report are the biggest global fall in retail rents in its 24 year history. In only 18 per cent of locations did prime rents rise.

Main Streets Across the World provides a global barometer of the strength of the retail sector and the popularity of shopping streets in 60 countries. Most of the ten most expensive streets in the world have seen their prime rents fall or remain static as retailers have reined in expansion. New York’s Fifth Avenue remains the world’s most expensive street where retailers can expect to pay $1,700 a sq ft per annum, a decline of 8.1% on 2008. Fifth Avenue has been the world’s most expensive street for the last eight years. Hong Kong’s Causeway Bay and Paris’s Avenue des Champs-Élysées maintain their positions at second and third respectively.

Germany’s Kaufingerstrasse in Munich was the biggest riser into the top ten moving to ninth from 12^th with a 7.1% increase in rents. Ireland’s Grafton Street in Dublin was the biggest faller in the top ten moving from fifth to eighth with prime rents falling 22.5%. Last year it entered the top five for the first time.

The world’s ten most expensive shopping streets 2009

Rank 2009	Rank 2008	Country	City	Street	US$/sq ft/year	€/sq m/year	% change
1	1	USA	New York	5th Avenue	1,700	13,027	(8.1)
2	2	China	Hong Kong	Causeway Bay	1,525	11,687	(15.1)
3	3	France	Paris	Avenue des Champs Elysees	1,009	7,732	0
4	4	Italy	Milan	Via Montenapoleone	887	6,800	1.5
5	7	Japan	Tokyo	Ginza	776	5,950	0
6	6	UK	London	New Bond Street	768	5,885	6.9
7	8	Switzerland	Zurich	Bahnhofstrasse	685	5,246	0
8	5	Ireland	Dublin	Grafton Street	568	4,356	(22.5)
9	12	Germany	Munich	Kaufingerstrasse	470	3,600	7.1
10	9	Australia	Sydney	Pitt Street Mall	448	3,436	(3.2)

Source: Cushman & Wakefield (full ranking contained in the report)

Globally, the biggest increase in rents was in Sao Paulo, Brazil, with rents at Alameda Lorena and Iguatemi Shopping rising 111% and 79.3% respectively. In Asia Pacific, Ho Chi Minh City’s CBD, Vietnam had the biggest increase at 50% whilst in Europe, Rue St Catherine in Bordeaux, France had the biggest increase at 17.6%.

Globally, the biggest fall in rents was in Mumbai with Colaba Causeway falling 63.5%. In the Americas, Rio de Janeiro’s Sao Conrado Fashion Mall fell 53.4% whilst in Europe, Bucharest’s Calea Victoriei fell 48.1%.

John Strachan, global head of retail, Cushman & Wakefield, said: “The last 12 months have been one of the most difficult periods ever for the retail sector with consumer spending and retail sales down in many markets. In the previous 12 month period global retail markets appeared to be fairly resilient but more recently the impact has been much more significant as the full impact of the downturn has been realised. The good news, however, is that the worst is almost certainly now behind us. Economic recovery in many major markets is now underway with key driver economies such as Germany now officially out of recession. 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.”

New York’s Fifth Avenue is once again the world’s most expensive shopping street where retailers can expect to pay $1,700 a sq ft per annum.

Gene Spiegelman, executive vice president, Cushman & Wakefield New York, said: “Fifth Avenue continues to provide global retail brands with the premier opportunity to communicate their message to the broadest possible international audience. Limited supply of prime positions combined with continued demand has minimized the downward pressure on Fifth Avenue rental values. Fifth Avenue’s resiliency also rests in its unique appeal to both luxury and specialty retail brands and their ability to successfully co-exist on the world's most expressive retail corridor. Notwithstanding the significant impact the downturn in the global economy has had upon the retail sector, the Manhattan marketplace and specifically Fifth Avenue have faired well as compared to the overall retail marketplace.”

Munich’s Kaufingerstrasse was the biggest riser into the top ten global ranking moving to ninth from 12^th with a 7.1% increase in rents.

Inga Schwarz, head of research, Cushman & Wakefield Germany, said: “Germany is one of the largest and most stable retail markets in Europe, which is why national and international retailers have always kept its largest cities on their agenda. Although the economy has been hit hard by the downturn, consumer spending has been surprisingly resilient and sentiment has improved since early Spring. With demand remaining fairly strong and supply being limited in prime locations, rents have proven to be robust through the crisis and are expected to remain so in coming months. Munich’s affluent consumers and the region’s continuing prosperity make its prime pitches a number one target for international brands seeking to expand into the German market which is why its rents have increased in the last 12 months.”

Globally, the biggest increase in rents was in Sao Paulo, Brazil, with rents at Alameda Lorena and Iguatemi Shopping rising 111% and 79.3% respectively.

Milena Morales, manager – research services, Cushman & Wakefield South America, said: “Despite the global financial crisis, IBGE’s figures show that Brazilian retail sales grew by 4.4% in the first five months of the year. This followed growth in 2008 of 9.1%. A reduction in taxation by the government has helped to boost consumer spending and we are not seeing widespread shop closures. Retail rents are therefore continuing to rise, mainly in São Paulo on streets in the Jardins area such as Al. Lorena and Haddock Lobo which have attracted stores previously located on Estados Unidos. Consumers are also attracted to more luxury brands and high end malls such as Shopping Iguatemi which also offer entertainment and better security.”

Anthea To, retail analyst, Cushman & Wakefield, said: “The global retail property market now appears to be more stable and a modest pick-up in activity may soon be evident. Whilst the availability of units in prime locations is tight and demand from occupiers is showing signs of improvement for these locations, secondary streets are expected to see a further downward adjustment in rents, as retailers focus increasingly on AAA locations and continue to scale down their presence in less profitable areas. It is also expected that occupier demand will continue to be selective and a significant resumption of rental growth in the short term is unlikely, at least until the wider global economy and labour market show firmer signs of recovery.”

Cushman & Wakefield is the world's largest privately held commercial real estate services firm. Founded in 1917, it has 230 offices in 58 countries and more than 15,000 employees. The firm represents a diverse customer base ranging from small businesses to Fortune 500 companies. It offers a complete range of services within four primary disciplines: Transaction Services, including tenant and landlord representation in office, industrial and retail real estate; Capital Markets, including property sales, investment management, valuation services, investment banking, debt and equity financing; Client Solutions, including integrated real estate strategies for large corporations and property owners, and Consulting Services, including business and real estate consulting. A recognized leader in global real estate research, the firm publishes a broad array of proprietary reports available on its online Knowledge Center at www.cushmanwakefield.com.

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