Sydney still number three for retail rents while Melbourne slips one spot: CBRE

Sydney has maintained its position as the city with the third most expensive retail rent while Melbourne has slipped one spot to number eight and Brisbane remains at number nine, according to CBRE.

Melbourne’s slight decline was despite it being globally the third-fastest-growing market, with rental growth in local currency at 32.3% growth for the year to September 30. It came in behind Hong Kong at 52.8% and Beijing at 40%.

“Melbourne started off at a low base and was further helped by many international tenants targeting this market, which has been cheaper and more easily obtainable than Sydney,” the CBRE report found.

“In Australia, global brands continue to open new stores, however many domestic retailers are consolidating as shoppers flock to the new foreign entrants in the market,” says CBRE global chief economist Ray Torto.

Source: CBRE

Sydney’s commercial rent was €9,823 per square metre, Melbourne was €6,230 and Brisbane’s was €6,230 for the third quarter.

The list was topped by New York at €15,244 per square metre and Hong Kong at €13,601.

A limited amount of prime retail space available in Australia and competition from new market entrants pushed Australian cities up the list, according to CBRE regional director of retail services, Joshua Loudoun.

“Over the course of the next 12 months we would expect that the Australian markets would slip slightly down the rankings due to numerous challenges faced by domestic retailers, in particular the record levels of outbound tourism, together with increasing labour and utility costs that have placed further pressure on occupancy costs,” Loudoun says.

The impact of the Eurozone crisis on consumer confidence led to global commercial rents levelling off in quarter three, the report found.

Total global retail rents largely flat at -0.6% from quarter two to quarter three, with the Americas falling  2% and rents unchanged in the Asia Pacific and Europe, Middle East and Africa regions, the report found.

“This represents a significant slowdown from earlier in the year as retailers take a more cautious approach to expansion.”

Despite an uncertain economic outlook, retailers continue to expand their international store networks, the report found.

“The emerging markets, particularly Asia, provide attractive opportunities for growth, although prime locations in Europe’s biggest cities are also attracting a high level of occupier demand, as consumers increasingly target major destinations with the widest choice of retailers,” Torto says.

“Overall, however, retailers have been taking a more cautious approach to expansion, resulting in flat rental growth across the globe in the third quarter – a considerable slowdown from earlier in the year.”