Global Retail Highlights – MidYear 2012
This spring proved to be a tricky time to conduct global benchmarking, as market sentiment has deteriorated markedly since April. During the past year, virtually every entity making a forecast— including Colliers in our 2012 U.S. Retail Outlook— included a caveat related to not-yet-quantifiable global fallout from Europe’s fiscal issues. As the past few months have illustrated, the time to face Eurozone issues has finally arrived, spawning a new wave of financial uncertainty.
More than two years post-recession, though, results from our annual survey of High Street rents illustrate that the world’s priciest retail corridors continue to attract the most sought-after tenants at lofty rental rates. Eight of Colliers’ top ten Global Retail Streets in 2011 made the list again this year. The big story, however, lies with the explosive year over year rental growth achieved in a handful of markets. Six of our Top 10 grew at double-digit levels year over year in local currency units, five of them by more than 20%.
At a regional level, streets in areas that entered 2007-08 better-positioned economically, such as Australia, Canada and parts of Eastern Europe had a higher percentage of this year’s flat-to-higher rents than those slower to emerge from the recession. We will be watching these areas closely. Even as they represent some of the most attractive destinations for expansion-minded companies and yield-seeking investors, they too are vulnerable to softening consumer demand and, for those with reliable data, encroachment of e-commerce.
This report contains two parts. The first summarizes the results of our annual Global Retail Streets survey, conducted in April 2012. The second incorporates content from Colliers’ brokerage and research teams worldwide who contributed market operational metrics, nuanced commentary on retail conditions, and forward-looking opinions on what the next year will hold for consumers, landlords, and investors.
- Colliers’ 2012 Global Retail Streets survey found that of 129 locations tracked, 51 posted higher year over year average rental rates, 49 were flat, and 24 were down (5 lacked comparable data).
- Retailers entering new markets—both developed and developing—continue to hedge risk by targeting the same one or two premier locations, generating heated competition and outsized rental rate growth in a handful of space-constrained corridors.
- Companies with the most ambitious long-term expansion plans remain focused on emerging markets with rapidly growing middle-class populations, but recently institutional capital has pulled back somewhat to favor core markets and investments.
- While economic and political turmoil did affect rental rates in headline-generating markets (such as Cairo and Athens), high streets with strong fundamentals remained remarkably resilient, suggesting, at least for now, some separation between macroeconomic issues and underlying real estate fundamentals.
- Since we conducted our survey, however, weakening consumer sentiment among affluent shoppers has already begun to impact retailers’ revenues and could hinder landlords’ near-term ability to raise rents, suggesting flattening growth rates for the coming year.