CBRE’s quarterly survey which tracks the most expensive global retail markets has listed Sydney (above), Melbourne and Brisbane in the top 10 for Q1 2013.
Ranked fifth, Sydney recorded prime retail rates at US$1,018 per square foot per annum, Melbourne ranked seventh at US$851 and Brisbane ranked ninth at US$739.
Hong Kong was listed as the most expensive retail market in the world, recording rates at US$4,328 per square foot per annum.
The city’s prime rents are approximately 150 per cent higher than New York and more than 400 per cent higher than London, Paris and Sydney
The survey revealed that strong demand from international retailers, as well as a modest supply pipeline, is behind the record-high prime rental rates.
CBRE Regional Director of Retail Services, Josh Loudoun, said vacancy rates in prime retail markets in Australia’s capital cities remained extremely low and continued interest from international retailers has added to this growth.
“We attribute this to a few key factors, including the fact that annual retail sales growth is back in line with longer term averages. Retailers are reporting far greater consistency in sales and this providing a base level of confidence not seen since 2010,” Mr Loudoun said.
“This lack of supply is what creates competition among the handful of retail categories that can sustain the high occupancy costs in the super prime market.”
The limited supply of prime space throughout the Asia Pacific region helped maintain rent levels, especially in Sydney, where there is a high demand from international retailers set to enter the market later this year.
Brisbane’s prime rental rate increased 15 per cent and rose two positions from last quarter due to a strong turnover and limited supply forecast for Brisbane’s Queen Street Mall.
Growth in the Brisbane retail sector is expected to continue due to the mining and natural resources industries supporting the local economy and the market’s population growth sparking signs of future retail growth.
The top four retail markets – Hong Kong, New York, London and Paris – showed no increase in prime rents this quarter, proving their resilience through international retailers looking at long-term expansion strategies in each market’s top locations.
However, Mr Loudoun also said Australia’s super prime rents acted as a barrier for new brands entering the market due to high occupancy and labour costs.
“We have seen this with groups like Hollister choosing to target shopping centre locations and with Top Shop opening on Chapel Street, Melbourne and Williams-Sonoma opening its first Australian store at Bondi Junction in Sydney,” he said.
Prime Retail Rent Ranking, Ranking by US$ per Sq. Ft. per Annum Basis