The rental decline in Asia appeared to be less severe. Hong Kong at US$1,192 per sq ft per year ranked the top in Asia and the third in the world, a 3.8% YoY decline.
Following Russell Street in Causeway Bay, Ginza in Tokyo and Orchard Road in Singapore took the second and third spots in Asia respectively. The premier streetfront rents in Ginza fell 12.9% YoY at US$590 per sq ft per year. Orchard Road dropped 11.8% YoY at US$324 per sq ft per year. Two Chinese cities – Shanghai and Beijing – made it to the top 50 retail strips the first time. The retail rents in Nanjing Road West, Shanghai rose to US$245 per sq ft per year while the rents in the Mall at CWTC, Beijing increased 25.5% at US$196.
"Despite the slow private consumption expenditure, the Hong Kong retail sales volume remained relatively resilient due to the spending of inbound visitors. Particularly, the predominant support was by those coming from Mainland China which recorded over 1 million arrivals per month with the help by the further liberalization measures under the Individual Visit Scheme," said Simon Lo, Director of Research and Advisory, Colliers International Hong Kong. "Thus, the retail rental in the local prime street saw a single-digit drop only in the past year, which was less than those in other countries."
"Based on the latest statistics released by the Government, the value of retail sales registered an increase of 4.3% MoM to over HK$21.6 billion in April 2009. This could be attributed to the improving consumption sentiment due to the stock prices rebound and the stabilising housing market," added Helen Mak, Director of Retail Services, Colliers International Hong Kong. "Looking ahead, steady performance of visitor and local spending will remain key for Hong Kong's retail market."
The report explained that the global recession reduced demand for some of the world's most prime real estate. Rents came down in double digits in many markets and in some cases by half. Some of the declines were due to the effects of a generally stronger dollar a year ago, but even accounting for the effects of movements in local currency, rents are down by a significant amount particularly in late 2008 and early 2009.
With lease rates down, some view now as an ideal time to expand. It is particularly the case for retailers that have a strong balance sheet. They see now as an ideal time to expand into markets or locations previously viewed as too expensive or difficult to penetrate. Luxury retail is sure to make a comeback, if not in the next 12 months, then soon after. The emergence of a sizable middle class in Asia Pacific, the Middle East and Central and Eastern Europe is to continue albeit at a reduced rate, but remains a trend that retailers are to watch.
According to the Global Retail Highlights report, New York's Fifth Avenue remained the most expensive retail street in the world, at US$1,400 per sq ft per year, a YoY drop of 15%. It was followed by Champs Elysees in Paris at US$1,203 per sq ft per year, a YoY decline of 18%, and Russell Street in Causeway Bay at US$1,192 per sq ft per year, a YoY drop of 3.8%.