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Hong Kong Retail Rents, 40 Times More Expensive than Bangkok Featured

Hong Kong, the world's highest retail rents by far Hong Kong, the world's highest retail rents by far

Prime rents in Bangkok in leading shopping centres rose in the second quarter, but they are still 40 times lower than the levels in Hong Kong - which is by far the world's highest, according to CBRE.

"Rental rates in Bangkok increased in the best shopping malls, especially in the downtown area," Jariya Thumtrongkitkul, head of retail services at CBRE Thailand, a property adviser said.

Hong Kong, at Bt124,650 per sqm per month, tops the rankings by a substantial margin. In contrast, at Bt3,100, the monthly rents in Bangkok is 40 times lower.

Bangkok's average rents rose 3.7% in the second quarter of this year compared to the same period last year. Increased tourist arrivals supported retail sales in Bangkok and resort cities. Because of the strong retail market, many global brands are entering the Thai market in the form of owned stores, franchises and distribution deals.

CBRE's second-quarter ranking of the top 10 prime global retail markets saw little change from previous quarters. However, four of the top 10 markets - New York, London, Zurich and Tokyo - saw quarterly increases in prime retail rents, compared with only one market during the previous quarter.

Historically low construction levels and fierce retailer competition for the best locations are fuelling this growth, leading to record-breaking rents in many global markets.

Prime rents in New York, ranked the second, at Bt87,843 are Bt36,800 below Hong Kong's. Similarly, a large spread of more than Bt52,000 was between New York and third-ranked Paris' Bt35,137.

Despite high rents, retailers continue to establish a presence in Hong Kong to benefit from that market's growing luxury retail scene. Last year 51 new retailers opened stores in the city, which has the highest representation of luxury retailers of all global markets.

Joe Lin, executive director of retail at CBRE Hong Kong, said healthy tourist arrivals and lack of available space made finding an adequate unit in prime retail locations a major challenge for new and existing retailers.

Units in prime locations with reasonable shop fronts and size rarely become available, leaving retailers with few choices. Preference for spaces with these characteristics continues to generate strong demand, supporting the market's high - and rising - prime rent levels.

New York displayed a 2.7-per-cent quarterly growth rate in prime retail rent levels, signifying a 22-per-cent increase from last year. Demand from international retailers remains strong and tourism levels continue to drive strong retail sales.

In London (Bt33,294), improving consumer confidence, robust sales and increased foot traffic have fuelled tenant demand.

The supply-and-demand imbalance on New Bond Street and Old Bond Street resulted in prime rents for central London increasing by 9.1% quarter over quarter and 20% year over year, as measured in the local currency.

Preference for prime space continues to affect prime rents in Zurich (Bt25,806), where rents increased 2.2% quarter on quarter and 5.6% year on year.

The tight supply of prime space, as well as the gradually strengthening confidence of occupiers, contributed |to a 2-per-cent quarter-on-quarter local-currency rental increase in Tokyo. As that city is viewed as the gateway |to Asia by many foreign retailers, competition for prime locations remained fierce.

Domestic retailers have also expanded, with some Osaka-based retailers expanding their presence in Tokyo for the first time.

Junichi Taguchi, managing director of CBRE's retail services division in Japan, said consumer demand and confidence conditions had notably improved thanks to a strengthening economy.

Luxury retailers noted a push in demand for brand items, which have been recording high sales in department stores since the beginning of the year, he said.

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