Two out of the region’s five hottest shopping districts are in Greater China, with the mainland set to be the centre of growth, according to a report released today by real estate consultancy Jones Lang LaSalle.
A decade ago many international retailers saw the risk-reward ratio in China to be challenging, as despite the nation’s rapid economic growth, the population was not yet know for liberal spending. Jones Lang now predicts that China’s shopping potential will lead the way in the near future.
The agency’s Head of Retail Asia Pacific, Anuj Puri, predicts, “China will witness the strongest growth in the retail markets of its top 50 cities, as Hong Kong continues to leverage its proximity to the mainland to fuel its own retail boom.
A report by Jones Lang rival Cushman & Wakefield earlier this month found that China is already Asia’s largest retail economy with sales of US$1.7 billion forecast for 2013, making the country the primary target for expanding international retailers.
Hong Kong Prices Still Highest in the Region
While China may be the future, the city seen as the gateway to the mainland still commands the highest rentals.
For retailers setting up new outlets, Hong Kong’s Russell Street is the most most expensive spot at US$28,839 per sqm per year, a rate nearly four times that of any other location in Asia Pacific. Next down the list is Tokyo’s famous Ginza at US$7,340 per sqm per year, and Shanghai’s West Nanjing Road at US$5,366 per sqm per year.
Tom Gaffney, Head of Retail for Jones Lang LaSalle in Hong Kong, commented, “Over the past three years, retail sales in Hong Kong have grown by an average of around 15 percent per year. This tremendous growth in sales and rentals over the past three years is largely due to a high demand from retailers, who are looking to establish a presence or expand their existing footprint in the city, coupled with limited supply – an imbalance on which landlords have capitalised.”
Gaffney added that he expects the trend to continue into 2014.
Asia’s 10 Hottest Shopping Spots and What Drives Prices
The report is the premiere edition of a new quarterly index to be maintained by Jones Lang and covers changes in the region’s retail property environment from July through September of 2013. In general, the consultancy found that strong demand for quality retail space, coupled with limited supply, has supported high street rents in prime Asia Pacific markets over the third quarter of the year.
Here’s a rundown of the ten most expensive places for retail rents in Asia Pacific with notes from Jones Lang LaSalle accompanying the listings.
1. Russell Street, Hong Kong
Rate: USD 28,839 per sqm per year
Hong Kong high street rents are, on average, four times higher than closest competitor, Tokyo. However, growth has slowed in Q3 2013 as costly rents force retailers to look towards shopping centres in secondary locations. Russell Street is the centre of the Causeway Bay shopping area, where major malls such as Wharf’s Times Square are located.
2. Ginza, Tokyo
Rate: USD 7,340 per sqm per year
Improved consumer sentiment and rising visitor arrivals continue to support the retail market in Japan with strong demand from luxury apparel brands and F&B retailers pushing Tokyo’s Ginza into second place in the list of the region’s most expensive high street rents.
3. West Nanjing Road, Shanghai
Rate: USD 5,366 per sqm per year
Offering unrivalled visibility and a high-end atmosphere, West Nanjing Road in Shanghai continues to draw interest from new-to-market retailers who vie for limited space.
4. Orchard Road, Singapore
Rate: USD 4,713 per sqm per year
Often used as the entry point for expansion into other Southeast Asian markets, demand from international retailers for space on Singapore’s Orchard Road remains strong. However, tight supply of suitable space and rising operating costs are putting pressure on retailers who are increasingly looking to the city’s growing number of suburban shopping centres.
5. Central Business District, Sydney
Rate: USD 3,273 per sqm per year
6. Central Business District, Melbourne
Rate: USD 3,178 per sqm per year
7. Central Business District, Brisbane
Rate: USD 2,973 per sqm per year
As a result of slower spending in CBD retail markets coupled with more subdued demand for leasing, rents on Australia’s high streets have faced pressure in the third quarter of 2013 with increased supply from shopping centres further affecting pricing.
8. Queen Street, Auckland
Rate: USD 2,080 per sqm per year
While rising income levels, a growing population, and improved sentiment is driving demand for retail space on Auckland’s Queen Street, retailer margins for select discretionary categories remain tight as caution around personal finances persists.
9. Linking Road, Mumbai
Rate: USD 1,548 per sqm per year
10. Connaught Place, Delhi
Rate: USD 1,444 per sqm per year
While demand for retail space in the Indian cities of Mumbai and Delhi remains healthy, high street rents have stayed flat this quarter as economic uncertainty has seen retailers resisting rental increases.