Despite rising rents the UAE retail market remains a competitive option for international retailers, according to the latest research by CBRE, the global real estate consulting firm.
Retail Rents in New York, London, Tokyo and Zurich on the Rise
Average retail rental rates for Dubai stood at US$114 per sq ft per annum and in Abu Dhabi at US$71 per sq ft per annum.
“The UAE remains an attractive destination for international retailers; with an array of brands already present and its relative affordability compared to other global retail markets. The emirates in many ways holds an edge over other established cities as it offers access to significant consumer numbers, high quality mall facilities, and cost sensitive rents even within prime centres” commented Mat Green, Head of Research and Consultancy UAE, CBRE Middle East.
“Retailers continue to expand into this region, often using Dubai as their ‘launch’ platform into other markets such as Doha, Riyadh and Jeddah. According to CBRE research, 25 new retailers opened stores in Dubai last year. A young population, strong brand association, solid household consumption and modern retail concepts coupled with a flourishing tourism sector continue to provide ideal conditions for retail growth in the country,” added Green.
“Abu Dhabi in particular is seeing significant new retail space under development, as it looks to establish itself as a major destination for leisure and shopping. New retail destinations such as the recently opened The Galleria, and the soon to be opened Yas Mall are helping to increase the emirates exposure, bringing with new brands and concepts for the region” concluded Green.
CBRE’s quarterly ranking (Q2 2013) of the top 10 prime global retail markets saw little change relative to 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 is fuelling this growth, leading to record-breaking rents in many global markets.
Hong Kong (US$4,328 per sq ft per annum) tops the rankings by a substantial margin. In second position posting prime rents $1,200 per sq ft below Hong Kong, is New York ($3,050 per sq ft per annum). Similarly, a large spread of more than $1,800 per sq ft per annum exists between New York and third-ranked Paris ($1,220 per sq ft per annum).
Prime Retail Rent Ranking, Ranking by US$ per Sq Ft per Annum Basis
New York displayed a 2.7% quarterly growth rate in prime retail rent levels, signifying a 22% annual increase relative to last year. Demand from international retailers remains strong in New York and tourism levels continue to drive strong retail sales activity.
In London ($1,156 per sq ft per annum), improving consumer confidence, robust sales and increased foot traffic have collectively fuelled tenant demand. In particular, 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 local currency.
Preference for prime space continues to impact prime rents in Zurich ($896 per sq ft per annum) where rents increased 2.2% quarter-over-quarter and 5.6% year-over-year.
The tight supply of prime space, as well as the gradually strengthening confidence of occupiers contributed to a 2.0% quarter-over-quarter local currency rental increase in Tokyo. Viewed as the gateway to Asia by many foreign retailers, competition for prime locations across Tokyo remained fierce. Domestic retailers have also expanded, with some Osaka-based retailers expanding their presence in the city for the first time.
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