Decreasing retail rents in conflict with increasing luxury spending in the world

According to the latest research conducted by Colliers International, the leading real estate company, premier street front rents in almost every region in the world moved lower for a second consecutive year. Rent decrease comes as a direct consequence of decreased demand for some of the most attractive world locations during the global economic crisis. Despite an improved global economic landscape, retailers were still expressing caution in terms of expanding and committing to new stores.

However, some facts point out that the worst of the downturn is over and that high-end retailers will be back pressing for more high profile stores in the world. The ROB Claymore/Robb Report Global Luxury Index ETF (www.claymore.com) shows a significant bounce back in 2009 recording big spendings by high-end consumers after nearly a two year hiatus. With many of the world’s rich feeling more secure and comfortable with luxury purchases, demand for high-end retail premises is expected to increase over the coming period.

With regard to the rents for the most attractive retail units in 2009, premier streets in Southeast Europe marked a significant rent decrease- averaging from 20-50% in comparison to previous year. While in Belgrade retail rents now amount around 100eur/m2, rents in other countries are lower, totaling: 75eur/m2 in Sofia, 70 eur/m2 in Zagreb and 90eur/m2 in Bucharest. Rental levels are still the highest in Athens amounting to 200 eur/m2. As for the other cities in Europe, Paris’ Avenue saw a low rents rise to 835 eur/m2, while London’s Bond Street was up sharply to 780 eur/m2.

In the U.S., New York’s Fifth Avenue saw rents decrease by 100 eur/m2 to register 830 eur/, while Madison Avenue fell about the same amount to 390 eur/m2. Chicago’s North Michigan Avenue saw rents slump 150 eur/m2, while San Francisco’s Union Square district saw rents hold steady at 265 eur/m2. Los Angeles’ Rodeo Drive, however, registered a small increase, rising to 280 eur/m2.

In Asia Pacific, Ginza-Chuo Avenue in Tokyo saw rents fall modestly to 362.5 eur/m2, while Hong Kong’s Causeway Bay district saw rents increase to 800 eur/m2.